Whether you are a new business or have been operating for a while, having the right cashflow plan in place will set you up for the long hall. The pathway to cashflow concerns varies from business-to-business but the journey often begins the same: there is a gap between when you have money and when you need it. Whilst getting a last-minute loan can be an effective way to plug cashflow and quickly put out the financial fire, it is only a short-term solution, not a long-term cashflow plan. This ‘fast and easy’ approach often becomes the most expensive (and stressful) solution, and your business problem is delayed, not solved.
To help SMEs reduce the likelihood of cashflow gaps and be ready for them when they occur, we’ve outlined the top three ways to take a more holistic approach to your business’ cashflow and reduce financial stress.
1. Offer payment plans (it’s easier than you think)
We know cashflow gaps can be reduced dramatically if you can be paid by your customers sooner. Currently, more and more customers are requesting businesses to provide flexible repayment options on services, or payment plans even. While small businesses are not in a position to be able to develop their own payment plans, offering tech integration options, such as Zip Payments or Zip Trade, allows clients time to repay their bill, whilst the business gets paid immediately and maintains its financial balance at the same time.
As an example, a small business invoices two weeks’ worth of sales equalling $5000 per day. That is $50,000 worth of work the business would be awaiting payment. Now, if a small business offered the option of Zip, they could take on-the-spot payments, shielding the company from financial stress, whilst providing customer flexibility. Even better, offering “payment plans” can help small businesses win work from clients who might be on the fence about committing if they need to pay the full amount upfront. Before you know it, many payments could become immediate, and you no longer need debt to fund your business and its growth.
2. Have a cashflow back up
It is always handy to have a back up plan in business. A line of credit is an option small to medium businesses could consider as a bridge for any financial gaps. A line of credit appears similar to a loan, but there are some big differences. Think of it as a pre-approved back up fund, ready for use, if and when you need it. If it is not used, the credit just sits there, costing you nothing. It is a stress-free solution for small businesses looking for a last-minute loan ready to go.
3. Think outside the box
Delayed and long payment terms can be the thorn in many businesses’ financial fluidity. A new creative option is invoice financing, a tactic to help secure funds to grow your business, without relying on customer repayments. Existing invoices are essentially “sold” to a third party to follow up and in return, you receive instant payment. The third-party partnership does involve an additional fee, however, the reward is securing funds early, without the need to pay for debt to fill the cashflow gap. When your business is faced with a financial gap, there are a number of seamless options and systems available to solve the issues and reduce stress. Propell works with small businesses to solve their problems in a more holistic way, with a range of payments and lending products they can tailor to their business.