Get started
Ways to manage and improve small business cash flow

11 August - 8 min read

There’s a reason why cash flow contains the word ‘flow.’ The way it travels in and out of your business is the very thing that keeps it thriving.

Cash flows into a business as it is received from customers when they pay invoices for goods and services and out of business when they pay staff, suppliers and operating expenses.

Healthy cash flow occurs when more money comes in then flows out, while the opposite scenario — having more outflows than income — can put your business under financial pressure.

COVID-19 put additional pressures on cash flow, causing many small-to-medium-sized (SME) businesses to close their doors, stand down employees, or drastically change the way they operate. A recent Australian study on SME businesses revealed that 52 percent were already struggling to pay themselves before the pandemic, suggesting over one million small Australian businesses (nearly half) were already facing cash flow issues.

The ‘why’ to the problem of poor cash flow is complicated but most often falls to these main culprits; the economy, poor business decisions, ineffective credit control and/or debt collection practices.

So, what can you do to improve cash flow within your business? We’ve put together some tips to help your business increase your cash flow from a trickle to a stream and eventually into a river.

1. Analyse Your Spending

Are you paying for goods or services that aren’t needed or necessary for your core business? Can you cut some of these expenses out of your weekly or monthly budget? Over time, small yet unnecessary costs add up.

While it costs money to make money, trivial expenses can lead to thousands of dollars in unnecessary bills and fees each year.

Minimise utility costs with simple disciplines and review your suppliers pricing and terms of trade to make sure you are getting the best bang for your buck.

Recurring services can also sting small-to-medium businesses. Suppose your company uses one software solution for POS, another for inventory control, and yet another to take payments. If this is the case with your business, it might be time to look into software that groups all of these functionalities into one solution.

Taking a hard look at your bills can help highlight possible savings.

Need more tips on how you can save money in these areas? Check out our other blog here:

2. Review Your Pricing and Total Cost of Supply

If your business gets paid on time, such as a retailer whose cash flow doesn’t depend on invoicing, then inefficient or outdated product pricing could be blamed for a drop in revenue and poor margins.

Check your pricing strategy and make sure you pass on supplier price increases promptly. Poorly managed cost change on fast-moving items can cost thousands of dollars in a short time period. Balance your range with high volume, lower margin items and sort-after high margin items that match customer demands.

Try to select suppliers who can drop ship and take advantage of delivery services to expand your range without having to keep stock on your shelves.

Keep an eye on the prices of your competitors and make sure your products are priced to sell. Under or over-charging can be crippling for businesses and damage profit margins.

Before conducting a pricing overhaul, it’s worth taking the time to review all factors contributing to price fluctuations over the last month, quarter, or year. This evaluation is essential and helps account for expenses, such as wages, equipment, vendor or supplier fees.

Covid-19 has affected the economy in a variety of ways. In the same way, your business is looking to cut unnecessary expenses and save as much as possible, so too are your customers. Items you are struggling to sell or that are overstocked could benefit from being put on sale. Even if you have to sell at a loss, getting cash moving is often a better outcome than inventory clogging up a storeroom or sitting in items that won’t sell.

The money you make from a quick sale on older items can go towards purchasing items that sell faster. Sales and in-store or online promotions are also a great incentive for customers and bring in more business.

3. Is Your Business Efficient?

While the notion of “efficiency” in business could easily warrant a stand-alone article, you can take many simple steps to give it a boost. Changes to how you schedule your workforce to the technology and software your business implements could improve business efficiency.

Save money on your property costs; optimise your space needs by developing a work-from-home strategy that utilises tools like zoom and empowers your team to work to their body clock. Reduce energy costs across heating, cooling, lighting, equipment and computing appliances by investing in energy smart gear.

Maximise the efforts of your team and remove mundane error-prone tasks from their day. One of the most significant time and money killers in business is manual data entry and inefficient payment management. Many businesses still use paper, PDF’s and spreadsheets to manage their invoices, data and accounting.

Think about how much time you waste each year managing paperwork, reconciliation and reporting. Now consider how much time you would save if these processes were automated.

Modernised and innovative software, like Spenda, can integrate all of your business data in one location.

4. Improve Payment Arrival Time

Sending an invoice doesn’t automatically translate to an instant payment. In Australia, 53% of all invoices are paid late, amounting to more than $115 billion in money owed to small businesses arriving late.

Some businesses offer incentives, such as discounts, to encourage their customers to settle outstanding accounts on time or even early. Other businesses prefer the stick over the carrot and impose penalties on businesses that pay late in the way of fines or lower credit terms.

Whichever method your business chooses, chances are debt collection is a human-centred task involving a lot of time and, in most cases, frustration on both ends.

Providing your customers with more payment options and improving your credit management processes with debt recovery tools, such as SpendaCollect, provides your business with new ways to solve an old problem.

This software not only notifies customers of the status of upcoming payments, but also allows customers greater flexibility with the unique capability of paying one, multiple or all invoices at once with a credit card or easy to access pay later finance.

Digitising the payment process for both the supplier and the customer removes inefficiencies and improves time management. Payments received through the SpendaCollect platform allow businesses to quickly and simply reconcile inbound payments against outstanding invoices within the platform without having to reconcile each payment against each invoice manually.

The kicker? These payments arrive in real-time to the supplier and integrate in seconds with small-to-medium financial software such as MYOB, Quickbooks and Xero. Businesses receive payments faster, while reconciliation is automated.

5. Advanced Payment Collection Software

Utilising payment and accounting software such as SpendaCollect can ease the burden of invoicing for small-to-medium businesses. Increasing the speed and regularity of payments will also likely give your cash flow a healthy boost.

SpendaCollect Functionalities That Help Improve Cash Flow

  1. Batch-payment processing. Eighty-five per cent of all Australian businesses still use outdated manual data entry processes such as PDF’s or paperwork to handle invoices, a contributing factor to why so many payments arrive late or are inaccurate. The option for customers to batch-pay outstanding invoices and have these payments reconcile in real-time for both the supplier and customer will save massive amounts of time, money and resources each year.
  2. Accept More Payment Types. No business owner or employee enjoys telling customers their preferred payment method is not accepted. Or that it will incur a surcharge. SpendaCollect, integrated with our payment platform SpendaPay, accepts a wide variety of payment types.
  3. Sends Invoices Out Immediately. If it takes you five days to send the invoices that’s five days of credit you are essentially giving your customers for free. Sending a list of one or multiple invoices quickly and enabling customers to make these payments in real-time will help ensure timely payments. Providing customers with a secure platform to view what they owe, when the payment is due, the payment types accepted and late payment fees should also help improve efficiency.
  4. Take Electronic Payments. Electronic payments are faster and often preferred by customers. Digital payments are also becoming more prevalent, given the effects of COVID-19 and trends to reduce payments made in cash.
  5. Look After Customers. If you maintain friendly, regular communication with your customers through better payment collection software, they’ll land better terms and feel more comfortable shopping with your business.

6. Start Selling Online

Since COVID-19 surfaced, many retailers and suppliers identified new markets to engage.

Looking into different selling models and moving your business from a strictly bricks and mortar store to a digital business can open up a much broader market. Doing so can expand your brand and products to a potential sea of clients or customers and direct digital engagement can help you determine new or existing ways to market your services.

If you’re a brick and mortar business with a thin online presence, now is the time to consider ramping up your e-commerce presence.

Not only can Spenda help set up your e-commerce site quickly and seamlessly, but we can also integrate with online platforms such as WooCommerce or Neto, so you can start selling online, fast.

Before diving into online sales, take the time to evaluate the costs, including understanding transaction fees, both in-store and online. Becoming a digital business might help your cash flow. Still, each business differs, so it’s important to first evaluate the pros and cons to your bottom line before opening to the online community.

Want to set up an e-commerce site or find out more about our dynamic payment collection system SpendaCollect? Contact 1300 682 521 or email

Related Articles

How to de-risk your supply chain and optimise the credit- to-cash process

Many companies benefited from a decade of low-interest rates and the fiscal policy measures put in place to minimise the impacts of COVID-19. However, these measures eventually had to taper.

Adrian Floate
How flexible payment terms could be the answer to your late payment problem

Having the ability to get paid quickly is key for any business, and yet late invoice payments continue to be a burden for many Australian businesses, costing around $1.1 billion per year.

Common invoicing mistakes that lead to late payments and how to avoid them

Invoicing is a core component of your business that can either lead to stable cash flow or late payments. And while it may feel like all of the power is in your debtor’s hands when it comes to getting paid on time, that isn’t always the case.