If late payments and invoicing issues are causing cash flow problems and holding your business back, here’s where to begin to take back control, writes Andrew Baines, GM Financial Services, MYOB.
When you run your own business, hard work comes with the territory. But despite how hard you work, unpaid and late invoice payments can have a serious impact on your cash flow and business performance.
No matter how resilient you are, without healthy cash flow, you risk stalling.
We know Aussie businesses are amazingly resilient. Our recent SME Success Report and SME Resilience Index showed most Australian small businesses are more resilient now than they were before the pandemic, and 67 per cent of small to medium sized businesses stated they are now as profitable or more profitable than they were before the pandemic.
Imagine if you could add reliable cash flow to the mix. It would lay the foundations for your business to move from surviving to thriving in a ‘COVID-19 normal’ world.
Chasing invoices
When it comes to on-time payments, thankfully the days of waiting for cheques to arrive in the post and being processed by the bank are long gone. eInvoicing systems have taken the guesswork out of payments, providing multiple payment options for your customers and automating payment reminders so you can focus on your business, rather than keeping track of outstanding invoices.
Our research shows on-time payments of invoices have improved over the past few years, with 32 per cent of small to medium businesses saying more invoices are being paid when they’re due.
This is due to a number of factors:
- 39 per cent of respondents said their customers are more conscientious and/or more able to pay
- 40 per cent of respondents said they’ve made a concerted effort to ask customers to pay on time
- 38 per cent have changed how their invoices are issued, including through the introduction of innovations like eInvoicing
However, while they’ve improved for some, on-time payments are still a recurring problem for many, especially smaller businesses.
Only six per cent of businesses with two to four employees and ten per cent of businesses with five to nine staff had seen an improvement in their on time invoice payments, compared to 51 per cent of businesses with 50+ employees.
Chasing invoices for payment has always been one of the toughest challenges for small businesses. And for micro businesses, it can be a major pain. Awkward follow-ups and phone calls, and promises of payments that don’t eventuate.
Unreliable payments can also have a knock-on effect – meaning small businesses awaiting payments are then late in paying their own suppliers, causing businesses to stall. Most small business owners can relate to the feeling of being profitable ‘on paper’, while their actual bank account sits empty, awaiting outstanding invoice payments.
Smoothing cash flow
Lack of cash flow can be the difference between building a thriving business – one where you can develop new products and services, enter new markets and maximise opportunities – and merely surviving.
Smooth cash flow for small businesses means small businesses can be in a position to contribute to the nation’s economic revival and growth, giving them the power to remain nimble as they invest in their businesses.
It’s about growing confidence. Because cash flow provides capacity to build, and as we embrace a new normal, now is the time to invest in future growth.
Many small business owners are still hesitant to spend the cash they do have – demonstrated by the fairly even split we received when asking SMEs what they would do with an unexpected cash windfall: 48 per cent said they would invest in their business, and 47 per cent would save the cash.
We all know nothing in business is 100 per cent certain, and new challenges arise all the time. For example, earlier this year it was fuel prices, not the pandemic, causing businesses the most stress and uncertainty.
Gaining control of your cash flow means you’re in the business driver’s seat. Imagine what you could create, with the confidence of reliable cash flow in your business.
Top tips for boosting cash flow:
- Set out clear payment terms when onboarding customers, so they understand their payment responsibilities.
- Automate payment processes and provide customers with multiple payment options – it’s about making payment as easy as possible.
- Consider upfront invoice financing options, like Butn, to smooth your cash flow in times of need.
- Maintain a cash reserve, but don’t be afraid to invest cash back into new opportunities for your business to fuel long term growth.
- Change your cash flow mindset. Now the pandemic situation has evolved, continuing to be overly cautious around spending could be a handbrake on your business.
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Now read this:
Are you ready? The e-invoicing revolution is here and it’s inevitable
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