We’re definitely living in “interesting times” these days.
So continuing to operate your business cash flow using a “passive hope” Cash Flow strategy – one that basically says “hang on hard enough for long enough and things will settle down” – is insufficient to this increasingly turbulent decade.
When Tropical Cyclone Alfred was spotted off the eastern coast of Australia, we saw a whole new level of “get prepared” messaging in the media, telling people what to do and pointing them to online resources to help them prepare for disruption.
Today, there are plenty of resources for cyclone preparation, including lists of:
- What to do BEFORE cyclone season.
- What to do when a CYCLONE WARNING is issued.
- What to do when the cyclone STRIKES.
In these interesting business times, with our ongoing “cost of operating” crisis, what can you do TODAY to prepare for the next business cash flow crisis BEFORE it hits?
What can you do to prepare your business to weather future financial storms?
Accept
Firstly – and maybe most importantly – ACCEPT that today’s level of disruption could well the new “normal minimum” for several years.
We’re unlikely to return to more stable financial times any time soon, given what’s currently going down globally. Putting your head down and working harder while hoping for “things to get better” ISN’T a sustainable solution.
Learn “the mechanics of cash flow”
Secondly, LEARN the basic business success “mechanics” of Cash Flow and Working Capital – the factors control how the financial fuel flows through your business.
That way you can avoid a stressful, business-breaking Cash Gap of running dry unexpectedly.
You DON’T need a degree in finance or accounting in order to understand how your available Working Capital works – just a more realistic model of how money moves – and sometimes doesn’t move – through your business.
Examine
Thirdly – EXAMINE your business financing assumptions. What are the REAL realities in your market and your industry?
What are the “everybody knows” opinions that “just ain’t so” any more? For example:
- SMEs can and should be able to prosper despite being required to offer 30/60/90 day industry credit terms that massively disrupt the flow of cash through their business.
- SME businesses who use cash flow finance tools like Debtor and Trade Finance have to use these “products of last resort” because they’re just bad money managers. (Not because they want the competitive advantage of more income, sooner.)
- Banks are in the business of strategically supporting SME businesses (not growing their home mortgage portfolios).
- Making more sales is a the best, long term solution to reducing your SME’s cash flow stress. It brings in more income without increasing up front input costs or operational challenges.
Assess your existing internal risks
Fourthly – be honest with yourself about your current financial obligations and the RISKS they create for your business future.
While it’s totally human to want to push the bad stuff under the carpet, if you have accumulated tax debt or fallen behind on super obligations, don’t fall for unrealistic “passive hope” expectations of “catching up when things get back to normal”.
Monitor external threats
Fifth – increase your AWARENESS of known and potential upcoming cash flow disruption THREATS so you can check your obligations and upgrade your cash flow strategy. For example, are you planning for these contingencies:
- Your compulsory Super Guarantee contribution rate increases from 11.5% to 12% on 1 July 2025.
- Payday Super becomes law from 1 July 2026 – giving you just 7 days from payday to make employee contributions.
- Tax debt interest charges may no longer be deductible – possibly from as early as 1 July 2025 depending on legislators. (Though the upcoming election may delay it for this year.)
Also think through what international trends could have flow on effects for your industry and your customer base? For example:
- International trade tariff increases.
- Conflict escalations.
- Major weather events.
It’s time to be ALERT (and possibly even just slightly alarmed)
It’s time to plan for the worst – and take action where you can.
Plan for key threats
Consult with trusted advisors and develop a 21st century Working Capital Strategy that actively increases your business’s Available Cash so you can weather future storms.
Review you current finance practices to make sure that you have good disciplines in place. (Use our FREE guide to SURVIVING CASH FLOW CHALLENGES to help your review.)
Talk to an expert Working Capital Strategist about today’s top tools for protecting and maximising the movement of cash through your business.
Action your plan
Finally – ACTION YOUR PLAN. It won’t do your business, your family or your future any good if it’s just a piece paper sitting in your desk drawer.
If you were in cyclone country, with evidence of increasing cyclones of increasing intensity, you’d keep your trees pruned and invest in storm shutters BEFORE you needed them.
You’d check for past flood levels, AND plan for new higher highs. You’d think about how to minimse the impacts of wind and rain events as well.
When a warning was issued, you’d clear the decks and (depending on location) consider sandbagging at-risk areas and raising ground floor furniture.
So if your Working Capital Strategist recommends Debtor Finance or Trade Finance – and it checks out with your advisors – do it! If you come across a Receivables Management Finance solution that offers you collection services as well as smoother cash flow – removing a job you hate – action it.
If you’re in a challenging industry like construction, evaluate whether Debtor Insurance – at the excellent rates you get with Debtor Finance – could protect your business future.
Safer tomorrow is SMARTER TODAY as well!
Putting a 21st century working capital strategy in place in your business can also make your business better today.
If you have Invoice Finance in place, then every time you invoice a customer, up to 80% of that money will be in your bank account the next day (not “next month – maybe”). That money is yours to use to grow your business, improve your infrastructure and relieve your stress.
If you have cost-effective Debtor Insurance in place as part of that Invoice Finance package, then if a customer goes to the wall, you don’t have to wait years for the liquidators – or risk your own business.
If you have Trade Finance in place, you have an extra 60-90 days to pay big suppliers, plus better bulk-buy opportunities. The gap between when you have to pay for your inputs and when you get paid shrinks dramatically.
Technology has changed business financing dramatically
The first major market to take up mobile phones was the SME market – when tradies realised the business benefit of taking inquiry calls while they were on an existing job site. The benefits way out-weighed the reputational risk “looking like a nerd”.
Paying for a coffee on credit by tapping your phone or card was a spendthrift nerd’s lazy idea ten years ago. Now it’s the default.
As more and more tech-enabled, business-oriented financing tools hit the market, the SMEs that look past outdated “finance=looming failure” will benefit from an up-to-date Working Capital toolkit that frees them from the Cash Trap.
If you’re tired of endlessly juggling bills while waiting for customers to pay you, book a free Working Capital Strategy Review today.
