Whether you are just starting your business, or your business is in a crucial growth phase, you will be well aware of your businesses cash flow. Cashflow, and the way you handle it, can be a defining factor in the success of your SME. In fact, according to statistics from the Australian Securities and Investments Commission (ASIC), 41% of business owners nominated cash flow as the primary cause of their business’s failure. However, if you are aware of issues that may arise, you can counteract them early to ensure they don’t impact your business.
So, to keep a good hold on your cash flow, you need to identify potential causes for any cash flow problems. So, before you get to the point where you have found yourself in the middle of cash flow problems, let’s go through some of the most common causes of cash flow problems for small and medium-sized businesses.
A lack of financial planning or poor financial planning can create ongoing cash flow issues for small and medium-sized businesses. Your business needs to create a detailed financial plan and budget and continue to update it regularly. This way, you can foresee any potential shortages and act accordingly. This might include having a plan to access additional funds if necessary.
One of the most common reasons for cash flow problems is payments being late. If customers consistently miss payment deadlines, this can put a substantial strain on your cash flow. A recent report from accounting and payments software Xero suggests that a customer can take an average of 36 days to pay an invoice with a payment term of 30 days. So, therefore, you should assume that your customers are unlikely to deliver on time and prepare a cash buffer to draw upon if needed.
Many SMEs will go through seasonal highs and lows in their sales. While these peak periods are significant for sales, they often involve more costs associated with additional staff and stock. Likewise, when the business goes through a lull, your finances will be under pressure. If you understand your business’s seasonal cycle, you can plan accordingly to ensure cash flow problems don’t become detrimental during this time.
Often when SMEs are searching for finance options, they will struggle to find a big bank to finance them. The lack of finance options for SMEs often causes cash flow problems, as there is no safety net for this business to fall back on or no finance options to factor into their financial plans. This is where finance companies that specialise in finance options for small and medium-sized businesses are essential.
Grow Finance specialises in providing a vast range of tailored finance solutions for SMEs. Their invoice finance offerings are an excellent non-bank option to improve your cash flow and help to avoid any detrimental cash flow issues. If you’re looking for the perfect solution to support your SMEs cash flow, then look no further than tailored invoice finance from Grow Finance.
To find out more, talk to the Grow Finance team today, call 1300 001 420, or if you are ready to move forward, then apply now.