On the road to recovery. The importance of future-proofing your business and cash flow.
With lockdowns slowly easing, Australia's economy is on the road to recovery. This is the time to be looking at your business and asking yourself, is your business set up and secure financially, is your business future-proofed and ready to handle growth?
If you're a small business owner in today's economy, it's likely that you're operating at a considerable disadvantage compared to businesses with more resources and stable cash flow. In February 2021, the Australian Bureau of Statistics reported that “41% of businesses reported that cash on hand could cover less than three months of business operations.” This is putting a large portion of Australian businesses in a vulnerable position.
What does future-proofing your business mean?
Future-proofing your business doesn't mean giving up on profits; it means making smart investments that will help you achieve greater profitability in the future.
Future-proofing is making sure your business is set up to thrive no matter what changes are happening around us. A good start to future-proofing your business is to analyse your financial situation and strategise your cash flow. Put simply, a business with low cash flow and ongoing growing financial commitments will likely not have enough financial means to invest in business advancement or initiatives for growth. This is why businesses need to have in place financial strategies and to be using the right technology to help advance and transform their business payment processes.
Dun & Bradstreet estimates that 90% of small business failures are caused by poor cash flow. One of the biggest culprits to businesses suffering from cash flow issues is late payments. A payment solution such as BizPay and many other providers can help eliminate late payment woes by giving businesses’ longer payment time and freeing up cash flow. This flexibility creates peace of mind and caters to different business schedules putting businesses in the position to potentially invest and focus on ways to grow their business instead of being bogged down with accumulating invoice payments.
The key to future-proofing your business… is cash flow.
Small businesses and SMEs can future proof their business by learning about new technology, financial trends, and best practices. Use this information to plan for the future and be proactive about managing your business' financial plan and getting your business growing in the right direction. Cash flow is a key factor in future-proofing your business, “as your business grows, you will need to find money to pay for more staff, bigger facilities and increased production costs” - Business Queensland.
This also means it is important to have a contingency plan in place for any unexpected expenses and costs. Explore finance options outside of your main budget so you have a fallback plan. Not having this contingency may lead to unforeseen expenses that could hurt your profit margin. No matter how organised your small business is, unpredictable expenses will always find ways to pop up.
Late payments, killing business cash flow
The importance of cash flow is vital for businesses, from paying employees to replenishing inventory, marketing your business and tax payments. But there is a rising cash flow crisis from the growing number of late payments.
“Late payment times for the June 2021 quarter averaged 11.2 days, a deterioration of 3.7% compared with the same time last year. While these figures are not particularly alarming, they nonetheless reflect a gradual worsening since the beginning of the COVID-19 pandemic. When compared with the March 2020 quarter, the late payment days average has worsened by 12.4%.” – illion’s Trade Exchange Program.
For years the Australian government has been “considering the introduction of a voluntary Prompt payment Protocol (‘the Protocol’) to tackle delays in trade payments between businesses, particularly late payments to small businesses. The Protocol aims to foster a broad change in Australia’s late payment culture by establishing core principles that set the benchmark for good payment practices” these include;
The Protocol Principles
1. Pay on time
2. Communicate clearly
3. Encourage good business relationships
4. Adopt a complaint resolution process
5. Identify yourself as a Prompt Payment Leader
How can payment options like BizPay help your business cash flow?
BizPay is a technology platform that solves cash flow challenges associated with paying business invoices. Our innovative financial products make BizPay the easiest way to increase your cash flow and grow your business.
BizPay’s own business mission is to help businesses thrive by improving cash flow, reducing costs, eliminating late payments and supporting your business relationships. Providing a service that will lessen that blow to your cash flow by aiding invoice payments by offering the flexibility of extended payment instalments.
Now to switch your mind from short-term focuses such as paying invoices to those long-term goals of your business journey. Invest time and money into your business by expanding your knowledge of the market, studying your competitors, advance in new technology or new equipment, leading to better operations and business efficiency so that you can concentrate on more important things, like your clients.
Written by BizPay
BizPay is a seamless technology platform that solves cash flow challenges associated with paying business invoices. The company was founded to help businesses grow better by enabling them to use top suppliers and professional service providers. Frictionless, transparent and affordable, innovative payment products allow businesses: to split bills into 4 easy instalments and/or receive full invoice payment in 24 hours to grow their businesses without being constrained by cash flow.