However, a first-aid plan can help ensure business continuity when outgoings suddenly start to exceed income. The trick is to put your plan into action before any real damage occurs. Here’s how.
Almost two-thirds of Australian small businesses have had to wait for their invoices to be paid, which in turn means just over a third then had to delay their own payments to suppliers.
While you can chase down and recover what you’re owed, it can be a time-consuming process. Instead, you can build a healthy buffer around your working capital by changing your payment terms. You could try:
If you find clients are still not paying you, there are steps you can take.
First, you should figure out whether there is a legally binding contract in place. A contract is legally binding if it includes an offer to enter into an agreement, acceptance of that offer, an intention to form a legal relationship and a financial agreement.
Second, once a legally binding contract has been established, you can explore how to recover the money you’re owed. You could:
Knowing which bills you need to pay and when could help you fill gaps in your cash flow. Those that have longer pay-by dates can be put off, letting you focus on those that are more urgent.
It means you can change the order that you pay bills. For example, some bills might charge interest or fees the longer you leave them, so it makes sense to pay these first and leave the less urgent for when more funds have come in.
Looking for additional funding to shore up day-to-day finances can be a good idea. To bridge unexpected cash gaps, you could look into quick-fix options like using a business credit card or applying for an unsecured business loan from your bank. These can often be approved and paid out within a matter of hours, meaning you can breathe easy sooner.
Taking decisive action to keep cash moving through your business is key to keeping your operation afloat and thriving. It's always best not to wait until you find yourself in the deep end to seek help. There are steps you can take to future-proof your business finances.
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