8 ways to increase your business cash flow

by Sophia Auld – journalist

Cash flow is a key driver of business success, but also a top source of stress for business owners. According to Xero’s July 2022 Crunch: Cash flow challenges facing small businesses report, 92% of Australian small businesses experience at least one negative cash flow month per year. Moreover, 20% were impacted for six months, indicating chronic cash flow stress.

But this doesn’t have to mean your business is destined for a capital crisis. Following these eight tips will help keep you on the positive side of the cash flow equation.

1. Negotiate with suppliers

Paying for the products and services you need to run your business is often a drain on cash flow. Try negotiating with your suppliers for a better deal. For example, they may be able to offer you discounts for bulk buys, regular purchases or early payments.

2. Review your outgoings

The business you run today probably looks very different to the one you started. Are you still spending on things you no longer need? For example, are you forking out for a social media campaign when you’re getting enough business through organic website traffic? Could you cut back on non-essential spending, such as a daily store-bought coffee for your team members? Revising your expenses could save you thousands each month.

3. Consolidate debt

Similarly, many small-to medium-businesses end up with several debts across multiple lenders. Servicing multiple loans can be costly financially and in terms of time and energy. Consider consolidating your debt under one loan with a suitable rate and terms.

4. Manage inventory wisely

A huge amount of cash can get tied up in stock. Take time to regularly track how stock flows in and out of your business. This will help ensure you have enough to meet demand, without locking up excessive capital.

5. Take deposits and progress payments

The other side of cash flow is ensuring enough capital is coming into your business regularly. If you do larger jobs, take a deposit and arrange a payment schedule. You might also like to take a deposit and agree on terms if you’re working with a new client or have any concerns about their capacity to pay the agreed amount.

6. Offer incentives for early payment

Everybody loves a discount. Offering a lower price for timely payment can be a great way to get customers to pay on or before the due date. Even a small discount is often enough to inspire payment action.

7. Shorten your payment terms

One thing you don’t need to be doing is cash-flowing your customers. Consider reducing your payment terms, or even implementing cash on delivery terms if possible.

8. Cash flow finance

Funding options are available to enhance business cash flow. Invoice finance (also known as debtor finance), for example, unlocks the equity in your outstanding invoices. If you need to buy or lease equipment, asset finance can allow you to pay for it over time, reducing the impact of a lump-sum payment on your working capital.

Trade finance can improve your cash flow while also mitigating risk. If you’re an importer, it provides funds to pay your suppliers before goods are received and turned into cash. For exporters, it provides cash flow until you receive payment from overseas customers.

These types of finance can typically be secured quickly, and don’t require you to put property up as security.

We offer a range of flexible funding options to suit your business’s circumstances and goals. Talk to us about how we can help you improve your cash flow for less stress and greater success.

Feel free to contact us for anything that relates to your business finances so we can help with your success.

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