How to avoid cash flow problems in your small business

How to

Thursday 01 December 2016

Don’t grow towards insolvency

Dun & Bradstreet's July 2014 Business Expectations Survey of SMEs1 found that cash flow was the factor most likely to influence a business’s operations in the third quarter of 2014.

Small to medium enterprises (SMEs) often think of cash flow as the amount of cash in the bank, says David Gonano, National Head Sales for Macquarie Business Banking.

However it may serve you better to see cash flow in more dynamic terms. It really refers to the swirl of money out of and into your business.

You don't have the option of delaying payment of most overheads, so high growth businesses with slow paying customers face a potential risk unless they manage cash flow well. Many successful business owners have been surprised to discover that strong sales aren't worth the spreadsheet they're recorded in - until the cash appears.

"Remember, if you're not getting paid, your clients are treating you like a bank that offers interest-free loans," says Gonano.

To help avoid cash flow problems, it's worth thinking about future payments strategies.

If you're not getting paid, your clients are treating you like a bank that offers interest-free loans.
David Gonano, Macquarie Business Banking.


For debtor payments consider:

  • whether to have a set of standard payment terms across the business
  • making your expectations about payment terms clear at the point of sale
  • sending reminder messages to late payers
  • how to give your customers a wide range of payment options, such as credit card, BPAY®, direct debit or cheque, as well as phone, online or in person payments
  • whether to give discounts to prompt payers. This is not as onerous as it might sound at first, because you’re probably already funding late payments via your overdraft or some other form of personal credit
  • whether an automated system like Macquarie’s DEFT, which can make it easier for clients to pay by giving them more options, would help.

As well as ensuring prompt payment by debtors, you also need to think about your own outgoing payments. Not all payments can be deferred, but you should take full advantage of any delayed payment terms that are offered.


For creditor payments consider:

  • training staff to pay invoices when they are due, rather than when they arrive
  • how much control your payment method gives you. If you use cleared funds to pay your suppliers, for example via BPAY®, you are in control of when the cash leaves your bank account. This is not the same for cheques as you don't know when it will be cashed, while direct debit puts the control in someone else's hands
  • whether automating your payments would benefit your business. A technology solution such as Macquarie Batch Payments may help by allowing multiple BPAY® payments, from multiple accounts, in one go.

Having the right people, practices and technology in place will greatly increase your chance of success.

  • Consider implementing a standard set of payment terms across your own business
  • Be upfront with clients about your payment terms
  • Automate where possible and ensure you never pay an invoice early again.
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1 Dun & Bradstreet's most recent Trade Payments Analysis (Q2 2014)

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The information on this page has been prepared by Macquarie Bank Limited ABN 46 008 583 542 (AFSL and Australian Credit Licence 237502) and does not take into account your objectives, financial situation or needs. Before making any financial investment decision or a decision about whether to acquire a financial, credit or lending product, a person should obtain and review the terms and conditions relating to that product and also seek independent financial, legal and taxation advice. All applications are subject to Macquarie’s standard credit approval criteria. This information is intended for recipients in Australia only.