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Ways to improve SME’s cash flow

 

Cash flow is the lifeblood of any business and key to its ongoing success.

With COVID-19 having a serious impact on so many small businesses, business owners now find themselves taking a closer look at their running costs and cash flow to assess the ongoing viability of their operations.

Here are some measures your business can take to improve your cash flow situation, both in the immediate future and over the long-term.

Understand your current financial situation

Before you can understand where short-term changes can be made, you’ll need a thorough assessment of your business as it stands right now. This financial analysis should gather the most up-to-date information on key parts of your business.

You can conduct your own analysis if you’re confident enough or you can engage a business adviser or accountant to do it for you.

Consider your industry context

To determine how well your small business is performing and will continue to perform in future, it’s important to also consider the wider context of the industry and general climate.

Some industries have been hit harder than others as a result of the COVID-19 crisis and are likely to suffer further difficulties as a result of ongoing social distancing measures.

Physical businesses will have different costs to consider than, for example, an online service business that operates without needing a leasehold or the shifting of any stock. Additionally, any business that relies on stock may find it’s subject to interruptions in supply chains, such as manufacturer delays or delivery delays, which may potentially affect its ability to generate revenue.

These aspects should be factored into forward-facing plans.

Consider other sources of funding

Consider selling assets such as machinery or equipment and leasing it back, injecting cash flow back into your business. By entering a Sale and Leaseback financial arrangement, your business sells their equipment to a financier who then immediately leases this equipment back to your own business, generally over a 3 to 5 year term. This allows you to spread out large repayments, whilst still maintaining use of the asset to continue operating.

Raising capital through your business assets could help solve both short and long term cash flow issues, depending on how you structure it.

Seek financial advice and business support

There is still a considerable amount of assistance, advice and support available to small businesses still getting back on their feet. Familiarise yourself with the measures the government has available and consider whether these are relevant to you and your business.

For eligible businesses, there is rent relief, fee waivers, wage subsidies, increases to the instant asset write-off threshold plus many more.

As well as support from the Federal Government, individual states and territories have also introduced financial assistance to help businesses affected by coronavirus, so check your relevant state government resources for further information about measures and possible relief you may be eligible for.

If your business is looking to generate working capital, Morris Finance can raise funds from a number of commercial goods. By offering a range of commercial products to provide cash flow for your business, our team of finance specialists can provide you with information and access to financial solutions that will allow you to grow your business.

Want to find out how? Contact us today on 03 5223 3453.

 

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