Australian businesses are urged to seize the opportunity at the end of the financial year to plan their cash flow budget meticulously.
With rising interest rates, inflation, and stricter lending conditions, SMEs are confronted with a challenging operational landscape. Financing solutions company, OptiPay, has witnessed a noteworthy surge of 20 per cent in inquiries this month. This surge stems from businesses expressing concerns about the need for additional support in order to foster growth amidst the prevailing conditions.
Mr Sedgwick, a seasoned expert in financial management, shares valuable tips for businesses to optimise their cash flow as the end of the financial year approaches. His first tip emphasises the importance of staying on top of invoices, as delayed payments can significantly impact small businesses, with some waiting for as long as three months to receive their cash. To incentivise timely payments, Mr Sedgwick suggests considering offering rewards or discounts for early settlement of invoices.
Efficient inventory management is another area that can positively impact cash flow. Excess stock can tie up valuable cash for extended periods, so implementing effective systems to manage inventory is important. By optimising stock levels and streamlining inventory processes, businesses can free up cash that may otherwise remain tied up in slow-moving or obsolete items.
Refreshing marketing campaigns can also contribute to improved cash flow. The end of the financial year provides an opportunity to evaluate and revitalise sales strategies. Businesses can consider implementing new digital campaigns and social media strategies to attract a wider audience and drive sales, thereby positively impacting cash flow.
Managing expenses is another critical aspect of maintaining a healthy cash flow. Regularly reviewing outgoing expenses allows businesses to identify areas where they may be overspending. However, Mr Sedgwick advises finding a balance between reducing costs and maintaining the quality of products or services. Cutting expenses indiscriminately may negatively impact the overall value proposition offered to customers.
Recognising the importance of financial support, Mr Sedgwick encourages businesses to leverage financial services to keep their cash flow on track. He suggests exploring different funding options tailored to business needs. One such option is invoice financing, which provides businesses with an upfront payment of up to 90% of outstanding invoice values.
With funds accessible within 24 hours, invoice financing can provide much-needed liquidity to growing businesses. The remaining 10% is remitted by the debtor finance provider once the customer pays, with a small fee deducted to compensate for early funding. This arrangement gives businesses security and peace of mind that they will have additional cash available when needed.
“The end of the financial year is a time when many businesses look to prepare their budget for the financial year ahead, and with an increase in operating costs and overheads in the current climate, many are already forecasting challenges in the months ahead,” says OptiPay CEO Angus Sedgwick.
OptiPay specialises in invoice financing – a revolving line of credit against unpaid invoices – to improve business cash flow.
“We encourage businesses to come to us early when they’re in that growth phase so we can introduce an invoice finance facility that they can then draw upon if they need it,” says Mr Sedgwick.
“This time of year, every business owner should be drawing up a cash flow forecast for the 12 months ahead and identifying challenging periods.”
“Knowing when your cash inflow and outflow are the highest can help you set aside a cash buffer earlier in the financial year,” says Mr Sedgwick.
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