Tips on managing cash flow for firms that are growing and surviving the pandemic

Depending on the state or sector your company is located in, Australia is currently experiencing a tale of two economies. Today, we'll go over three cash flow suggestions for your company, whether it's expanding or struggling.

In Australia, Covid-19 has truly brought a two-speed economy to the fore.

The pandemic’s stop-start-stop nature has harmed some firms’ financial flow and made planning ahead nearly difficult.

In the meantime, other businesses, such as those in the digital arena, are booming.

Your cash flow plan for this fiscal year will most likely be determined by how the epidemic affects it.

As a result, SME lender ScotPac has identified three cash flow management solutions for both expanding and failing enterprises.

Three pointers for navigating growth

  1. Find a flexible source of funding: According to ScotPac senior executive Craig Michie, “good cash flow is vital for fast-growth enterprises, which typically have a lot of capital tied up with creditors.”

“Finding a source of capital that develops with your business is critical.” “With invoice financing, as your debtor base grows, so does your line of credit,” he explains.

“Another effect of rapid growth is the need for the company to invest in more capital assets, such as vehicles and equipment.” Asset finance can assist a company receive the assets it needs to support its rapid expansion in certain instances.”

  1. Negotiate with suppliers: Sometimes a company’s growth is too rapid for its suppliers to keep up with demand.

You might try to renegotiate conditions with your supplier or look for alternate financing solutions if you don’t have the cash flow to pay for more stuff up front.

“Trade finance is one option for fast-growing enterprises to have up their sleeves. This allows them to pay suppliers in advance, allowing them to fulfill rising product demand, according to Mr Michie.

  1. Cash flow forecasting is critical: cash flow is sometimes referred to be a company’s “lifeblood.”

Knowing what cash is likely to come in and what is likely to go out is crucial for not only keeping your firm alive, but also ensuring that it thrives.

Mr Michie says, “It’s not uncommon for a small business to spend months winning major new clients, only to discover they hadn’t factored in the cashflow implications of obtaining new business.”

“Setting up a 13-week rolling cash flow plan with your accountant – which should just take an hour – helps fast-growing businesses avoid cash flow concerns.”

Three pointers for dealing with adversity

  1. Make contact with donors and the tax office: many firms are struggling as a result of recent state lockdowns and continued uncertainty in NSW.

Mr. Michie believes it is critical for businesses experiencing difficult market conditions to speak with their financial advisors as soon as possible.

“Do this as soon as possible in the piece for the best results. “Check with your funder to see if you can restructure or put in place moratoriums,” he advises.

He also advises SMEs to speak with the Australian Tax Office as soon as possible.

 

“Too many firms make the mistake of believing that ignoring an issue solves it; staying ahead of tax obligations is critical.”

  1. Look at your balance sheet: Mr Michie recommends looking at your balance sheet’s assets to help secure working cash for your company.

“For many SMEs, balance sheet assets can be a hidden resource — your debtor’s ledger, unencumbered plant and equipment, and even inventory can be utilized to reintroduce working capital.”

  1. Again, cash flow forecasting is critical: according to Mr Michie, having a running 13-week cashflow projection allows business owners to see any cashflow shortages on the horizon and take action before they become a problem.

This could entail reevaluating your cost base, negotiating with creditors to adjust terms or defer payments, or pursuing down old receivables, according to him.

Last but not least, contact us.

Get in touch with us today if you’d like to learn more about how any of the above cash flow tips or financing options could benefit your company.

The sooner we can go over your alternatives with you, the more prepared your company will be for the fiscal year 2021 and beyond. To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au

 

Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your situation and may not be relevant to circumstances. Before taking any action, consider your particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.

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