Giving Your Small Business Cash Flow a Boost When Times Are Tough

Your small business cash flow is vital to managing your day-to-day operations – and your stress levels! It’s important to remember that cash flow issues don’t just arise when profits are in decline. They can happen to any business at any time, if they aren’t carefully managed.  

Here are 5 ways to improve your small business cash flow: 

1. Improved management of accounts receivable. 

You should ensure that you have strong policies in place to manage your accounts receivable. We’ve outlined some practical changes you can implement today to improve your business billing:  

• Invoice your customers regularly. 
• Clearly outline your available payment methods – make it easy for your customers to pay you.  
• Set safe customer credit limits.  
• Outline your terms for late payments, including penalties, on your invoice.  
• Keep regular contact with your customers.  
• Ensure your staff know your business payment policies – and stick to them. 

2. Offering discounts for upfront payment. 

Offering a discount for customers who pay upfront provides an incentive for them to pay early. This reduces the potential of your debts becoming bad debts and it puts money in your business bank account sooner.  

Check out our video for more information about how taking upfront payments can give your small business cash flow a boost:  

Sharp Accounting – How taking upfront payments can improve the cash flow of your business 

3. Review current finance commitments and consider refinancing to a lower rate. 

Paying less interest on your business debt keeps more money in your pocket. So, in some cases, refinancing your current debt at a lower rate makes sense. But not always.  

You need to consider more than just the interest rate. Exit fees, payment terms, penalties, application fees, longer loan terms, and other fees can make switching to a lower rate more expensive than it seems.  

If you’ve considered the terms and conditions and refinancing is in your interest, it’s a valuable tool for reducing the total cost of your business debt.  

4. Boost business cash flow using reduced credit terms for customers. 

The Australian Government is helping small businesses negotiate fairer terms with larger businesses via the Supplier Payment Code. This initiative requires big businesses to pay small businesses within 30 days. You can read more about it here.  

Whether you serve these bigger businesses or not, you can ask your customers to pay sooner. For any new customers, simply outline that your terms of payment are 15 or 30 days – whatever you choose. For your long-time customers, it may be worthwhile explaining the rationale behind the change and/or moving them to the new payment terms over time.  

5. Increase credit terms with suppliers. 

You have plenty of bargaining power as a customer. But your suppliers and your business have competing wishes: you want the longest payment terms possible – and they want the money in their pocket as swiftly as possible. There’s plenty of room for negotiation here.  

To start, ask to extend your payment timeline out to 45 days (up from the standard 30 days). Then, pay your suppliers on the due date – not before, and not after.  

There are some further tips about negotiating payment terms with your suppliers in this Business Victoria article. 

Book a Business Health Check with Sharp Accounting 

Let us give your business a health check.

We will check that your business is as competitive, focused and profitable as it can be, offering flexible strategies designed to address the issues affecting your business. 

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