Flexibility through financial security

Evolving consumer demands, a dynamic competitive landscape and the broader economic climate are all issues that can place unforeseen pressures on a small business. Being able to manage, adapt or take advantage of these factors is critical for survival and can help drive success.


What lies at the heart of businesses that do succeed are firm financial foundations and the capacity for budget and operational flexibility in times of change.

Building or strengthening the financial core will also provide a framework to help owners achieve their business goals. Of course, different businesses will face their own unique challenges. There are some fundamental areas that all business owners must address, namely: business planning, securing appropriate funding, managing money and seeking advice.

Business planning

It’s an old adage, but businesses that fail to plan, really do plan to fail. Business planning can appear daunting and timely but, once done, should provide a blueprint for business success in just a few succinct pages in point form outlining the vision for the business including objectives, financial goals and strategy should suffice.

Documenting the business plan will also help owners better understand their business, their strengths and weaknesses, and identify what they hope to gain from the business in the future. A business plan will not only keep the business on the right track but also be the key to success when applying for finance to support or grow the business.

Funding the business

When seeking finance, a solid business plan is fundamental in demonstrating operational strength, adequate working capital projections, the ability to meet loan repayments, and security for the loan. Having all of this information at the ready reduces the perceived lending risks and will assist the owner in obtaining the right levels of funding.

Once the financial foundations have been laid and the business is ready to expand, it may be necessary to seek additional funding to cover the cost of new equipment, new vehicles, different operating systems or even extra cash to inject into the business.

There are various financing options available, ranging from asset finance through to business credit cards, which can address each specific business need. It’s important to select the most appropriate solution and match the time period of the loan to the life of the asset. By doing so, the asset will pay for itself over time while generating the income required by the business to meet the repayments.

Managing the money daily

Beyond business planning and seeking the right funding, a successful business is one that has strong financial management. This includes the setting and keeping of achievable business benchmarks as well as the maintenance of a healthy cash flow cycle and adequate levels of working capital. All together this will help keep the business in great shape.

When it comes to managing cash flow, it’s important to remember that making a sale is not the end of the cycle. Consider when payment is due for the goods/services and when you will receive the cash from a sale. Also keep in mind any seasonal fluctuations in custom to ensure there is enough cash flow to sustain the business in slow periods.

Financially fit

You can achieve better financial management through subtle changes. Consider the benefits of billing a portion of customers each week to bring in a steady flow of funds instead of undertaking one mass billing at the end of the month. Similarly, sending pre-addressed and stamped remittance envelopes may seem like an insignificant step, but can shorten repayment times and bring money into your business faster.

Remember that old saying ‘you have to spend money to save money’? Outsourcing a non-core business function may seem like an unnecessary expense, but could actually have a positive impact on the business’ cash flow in the longer-term. It will free up time for business owners to concentrate on tasks essential to improving and growing the business, ultimately bringing more cash into the cycle.

Seeking advice

Importantly, if in doubt, ask an expert. The nature of small business requires owners to have general knowledge of all business functions, but it is impossible to be an expert at everything. Engage professional advisers in discussions early for them to best understand the business and to achieve the best business outcome.

* Arnie Selvarajah is general manager of Local Business Banking at the Commonwealth Bank

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