Ways to improve your SME's cash flow
Cash flow is a major problem for small businesses in Australia, with nine out of 10 SME's saying it prevented revenue growth.
The SME Growth Index showed that over 20 percent of local small businesses were unable to take on new work because of cash flow problems while the vast majority of respondents said that improved cash flow would result in more revenue for their business.
Here are some measures your small business can take to improve your cash flow situation, both in the immediate future and over the long-term.
Expand payment options including mobile POS
Providing a range of different payment options for your clients can minimise the frequency of delinquent payments.
Mobile technology has improved dramatically in recent years and adopting a mobile point of sale is a great way to take payment immediately, on the spot.
Speak to your bank about the mobile POS options available and you may be able to improve your cash flow by taking payments at the point of sale.
Digital invoicing and other software tools
Getting bogged down in paperwork can be detrimental to cash flow, which is why it can be a great help to eliminate the physical paper part of invoicing.
There is a range of digital invoicing software options available that can help you schedule and automate invoicing with SMS and email reminders automatically sent to your customers as well.
This streamlines the invoicing part of your business and not only will it hopefully lead to faster payments, it frees your arms to grow your SME as well.
Adopt the human touch
Digital alerts, automated reminders, scheduled emails - there are a whole raft of ways that we can remind customers that payment is due.
But the old school method of picking up the phone and calling is often the most effective measure.
Digital reminders can be easily dismissed but a human voice reminds the customer that the business providing them goods and/or services has human faces behind it.
Improve your marketing activities
Generating more business is always a great cure for cash flow problems.
Fine-tuning your marketing activities can greatly improve your cash flow through the adoption of just a few simple tactics.
· Finetune your target market: Casting a wide net is quite often not the best approach in marketing. Understand your target audience, zero in on that audience with your marketing and you will waste less time and money on trying to bring in new customers.
· Understand the pain points: By knowing that products or services your customers would like to see improved, you can make these changes to meet their needs and improve word of mouth recognition.
· Keep and analyse a database: Keep a list of all your customers’ details and monitor their buying habits. This will help you build the profile of your perfect customer which can help in targeting your marketing.
· Answer every call, return every message: Research has shown that 45 per cent of all enquiries lead to a sale, so don’t lapse on speaking to potential customers.
Communication through the whole process is the key
Smart Company’s Emily Ross said said getting the basics right was important to improve cash flow.
“Issue correct invoices on time, follow up on invoices, and be prepared to take action against delinquent payers,” she said.
These basics begin at the first communications, when payment terms should be made clear from the start.
Constant communication and beginning the collections process early are also key, while having a mix of clients on long and short-term payment plans can help ease cash flow concerns over the long term.
And, of course, finding the right financial advisor is critical to long term success.
Did you know that you can unlock equity in your business assets to create working capital? Morris Finance can help you improve your cash flow in the long and short term using this method, which also creates taxation benefits for your business.