Cash flow problems are killing SMB growth: here are five ways to safeguard your business


The numbers are in and the news isn’t great for Australian small business owners. Research undertaken for the latest Scottish Pacific SME Growth Index * shows more than half of SMBs cite cash flow as a major barrier to growth (56%). Less than one in ten are content with their cash flow and around three-quarters of growing businesses say revenue would have increased by up to 50% if they had better cash flow.

Like it or not, the survival of many small businesses depends solely on the ability to manage cash flow. Retailers may need to pay in advance for bulk purchases ahead of the holidays. Cafes need to add new signage and equipment to acquire new customers and businesses across every industry run into difficulties when clients delay paying invoices.

With business owners almost universally dipping into their own pockets to fund new investments, it is time to start looking at other ways to better manage cash flow.

  1. Set clear payment terms

If you don’t know when something is overdue, how can you manage cash flow? Be clear with your payment terms and invoice in advance or as work is completed. Small businesses should push to get payment within 30 days of invoicing but negotiate the longest possible terms for accounts payable. There are even new solutions that will automatically ‘chase’ late invoices for you. If possible, also consider direct debit payments for your customers to minimise the gap between invoicing and payment.

  1. Forecast, forecast, forecast.

As a business owner, it is important to understand how much cash your business needs to run day-to-day. Outgoings such as rent, bills and staff wages need to be compared to the revenue your business is bringing in. Once you know your budget, you can start to measure results and forecast what you need to stay afloat. Begin by setting cash flow targets and update weekly to get a more accurate outlook for the next six to 12 months.

  1. Offer retainer packages

 Particularly for service-based businesses, offering your clients an up-front paid retainer, each month may be beneficial for your cash flow. Retainers offer the client a slightly discounted rate, but getting paid up front rather than in arrears allows you to better forecast your cash flow.

  1. Use alternative finance as a safety net

There is no need to dip into your own pocket or rely on credit cards to get you through gaps in cash flow. A record number of business owners are funding their businesses with a non-bank lender.

Alternative lenders are different from so-called ‘payday lenders’. Loans from an online lender range between $5,000 and $400,000 depending on your business, revenue and how long you’ve been in business. They are often repaid over 3-12 months but offer fast turn-around times, easy online applications and quick access to capital. Your business may be eligible for an unsecured business loan, a line of credit or invoice finance.

  1. Keep finding new business

Don’t expect that your customers this month will be your customers next month. Business owners of all sizes must consistently build a pipeline of new business and new work for the coming months. If you rest on your laurels of attaining new business, you might be hit with a trough when one of your biggest accounts goes elsewhere.

  • https://www.scottishpacific.com/media-releases/smes-drift-from-banks-non-bank-lending-intention-doubles

About the author

Yanir Yakutiel is the founder and CEO of Sail Funding, a small business loan provider. He has more than 15 years’ experience working in finance including in an asset finance function at a leading shipping company and at financial technology innovator, ICAP plc., initially in freight futures and then in cash equities. He also launched, managed and developed a successful global dry freight shipping company.

[Editor’s note: Yakutiel recently spoke with Dynamic Business about his company and its participation in the Tel Aviv Landing Pad program. See: The CEO of FinTech lender Sail discusses what he learnt from the start-up ecosystem in Tel Aviv]