6 smart hacks to manage cashflow

1Data is power

With all the manual time and effort that comes with paper-based data, it might be time to let technology do the heavy lifting. Moving to cloud-based technology, for example, can bring with it a whole host of benefits, including the ability to access data and business information anywhere and collaborate easily across geographical borders.

“We manage cashflow using a combination of online-based platforms Xero and PayPal,” says Brock Sykes, founder of Odd Pears. “With Xero, we’re able to reconcile transactions for day-to-day accounts and PayPal. This can provide an overview of how our finances are being used across the business. It can be particularly insightful over the long term where obvious patterns and trends begin to emerge.”

2Try the personal touch

An advantage small businesses have over bigger ones is the ability to offer genuine, personal service. This can work in your favour when it comes to cashflow too. As soon as a client misses a deadline, pick up the phone.

Calling people directly to have a friendly conversation about payment is much more effective than a barrage of impersonal emails. You can solve the problem immediately over the phone, skipping the back-and-forth that often comes with email, and it’s harder for them to ignore a voice than an automated message in their inbox.

3Consider your payment terms

Each customer, supplier and circumstance will be different, but it’s always worth reviewing your payment terms. Is it possible to get paid upfront? Or to receive a 50% down payment ahead of providing services? Find out what the industry standard is for your business, then consider things like the payee’s history, size of invoice and the job itself.

“We have a blanket rule across the board, and we don’t deviate from it,” says Liz Cook, founder and director of One Seed. “Our clients know our terms and they don’t question them because we work on the relationships first and we make it easy to do business with us. They know they are valued, and they respond by working within our terms.”

4Be bold enough to barter

Don’t be afraid to ask suppliers and wholesalers for a better deal. It could be deferring the whole or part of a payment, extending a due date or giving you some leeway. The worst thing that can happen is they say no, and you can always shop around for a better deal from someone else.

5Think strategically

Make strategic decisions, such as investing in new equipment or holding a sale to clear excess stock, based on the ebbs and flows of your business. Effective financial forecasting can help you plan for and achieve your goals. And there are plenty of tools out there to help.

“We have used PayPal Working Capital² a couple of times when cashflow has been really tight or we need to acquire inventory or equipment during a big growth phase,” says Liz.

It’s important to anticipate and accrue cash when business is booming, but equalising spending is also important. Just because a few big clients all pay in one month doesn’t mean it’s time to go on a spending spree, so track expenses over a 3-month period to see where your outgoings are and average them out.

6Send invoices promptly

Australian businesses are collectively owed $26 billion at any one time.¹ For a small to medium business, outstanding debt can be tough. But there’s no point in complaining about it if you lag in sending out invoices or, even worse, don’t send them! Make it easy for customers to pay by invoicing on time and giving them a range of payment options. Add penalties for late payments or discounts for early ones.

“For retail customers buying from our online store, we give them several options for checkout, including PayPal, credit card payments and Apple Pay,” says Brock. “For wholesale clients, they have the option of paying via direct deposit or PayPal. Giving clients a few options makes it easy to do business with you.”

Find out how PayPal Working Capital² can help you manage your cashflow.