There is a wide array of different reasons why a small business might need access to extra incoming cash at any particular moment. Sometimes, they need to deal with a sudden-yet-important extended supplier payment. Other times, they’re just looking for new ways to better deal with seasonal cash fluctuations. Often, they’re dealing with customers who just can’t seem to pay on time.
Regardless of the reason, it’s always important to know your options before you begin looking for new opportunities to ease these potentially troubling times. In terms of funding vs lending, for example, you’ll always want to keep a few key things in mind.
All companies need a steady stream of cash to stay in operation, but at times high growth business can encounter cash flow shortages.
Without enough cash in the bank you can’t pay suppliers, staff or ongoing operating costs, and your business will surely struggle. It’s no wonder that the Victorian State Government estimates that 80% of Australian businesses fail because of cash flow issues.
Although there are solutions to cash flow problems such as invoice finance it is still important to know the sources of cash flow issues, so we can understand the best method to remedy the situation.
Let’s have a look at common causes as to why SMEs have cash flow problems:
1. Delayed payments
New research from OptiPay shows that Australian SMEs are having serious cash flow problems caused by customers failing to pay on time. The data shows that these businesses are struggling under the weight of the $76 billion worth of outstanding invoices.
Additionally, delays in payments make it difficult for you to prepare an accurate cash flow forecast. How can you plan an expense or an outgoing payment when you’re not even sure when will you receive your next incoming payment from your debtor/s? Cash flow forecasting is important and is something you shouldn’t skip as it helps make all the important decisions needed to keep the business going in the right direction.
2. Fast expansion
Hasty expansion is one of the most common causes for Australian SMEs’ cash flow complications. A Wolters Kluwer (WK) survey of owners of over 1,000 small businesses that failed proves this, with over 35% of respondents saying their failure was due to fast expansion and the inability to control the working capital requirements of their business.
Progression is vital, but it can also be risky, so before you start expanding your business ensure that your cash flow is up to the task.
3. Poor Inventory Management
Another common cause of cash flow problems is poor inventory management, which can lead to an excess of stock lying around; assets that tie up valuable cash for months on end.
In addition to holding back cash that you could be using to fund your business, keeping too much stock means you run the danger of it becoming outdated and obsolete, which can land you in further trouble.
4. No sales leads
Poor cash flow can simply be a result of low sales and a lack of new leads.
Whether it’s due to low seasonal demand or an over-all slowdown of business, many organisations can hit a roadblock in sales from time to time. Freshening up your marketing campaigns can be one way of getting around this problem, not to mention a focus on digital marketing and new sales people.
If you are experiencing some of the above issues in your business, you should to address them immediately. Unless you are able to quickly resolve these problems directly you may be wise to engage the services of a fintech financier like OptiPay to help solve your cash flow problems and provide you business with the extra cash that it needs in order to keep up with its growth and working capital it requires as a result.
OptiPay can help you find smarter ways to use your own cash and avoid the pitfalls of borrowing funds. OptiPay’s whole purpose is to support the future of Australian businesses by bringing businesses like yours, “tomorrow’s cash flow today”.
With OptiPay, there’s just one simple, fair discount rate on any invoice you choose to cash-flow. No upfront fees, lock-in contracts, no property security, no nonsense.
“Get Tomorrow’s Cash flow Today”
Who is OptiPay?
OptiPay, one of Australia’s leading business finance providers, has been dedicated to helping small business owners solve cash flow challenges for over a decade and has provided $1.5 billion in business funding to more than 500 Australian businesses. OptiPay specialises in modern financing solutions such as invoice factoring, invoice finance, debtor finance, and lines of credit. OptiPay’s mission is to support business growth providing liquidity in as little as 24 hours, ensuring they have access to tomorrow’s cash flow today. This rapid access to funds helps businesses maintain smooth operations and seize growth opportunities without the stress of cash flow constraints. At OptiPay, we believe that healthy cash flow is the lifeblood of any successful business. Our commitment to helping businesses overcome financial hurdles and achieve their growth ambitions has solidified our reputation as a trusted partner in the business finance sector. Whether you are looking to stabilise your cash flow, expand your operations, or navigate financial challenges, OptiPay is here to support your journey with innovative and efficient financing solutions.
