This is a crucial time for businesses facing a lockdown-induced cash crunch. You’re right to be considering immediate steps to improve your cash flow, particularly over the next few weeks. Start with looking closely at your working capital needs for the next twelve months and identifying some quick ways to get that cashflow going.
You can make savings now immediately. If you’re registered with Swoop we can instantly match you with savings solutions across your everyday spend.
Here are our ten steps to help you save, improve cash flow and boost your working capital:
1. Monitor cash flow daily or at least weekly
If you don’t already use online accounting software, now’s the time! There are different brands of software but they all allow you to store your accounting information in the cloud so you can stay on top of your cash flow wherever you are. Most importantly you can view cash flow forecasts with a few mouse clicks. Swoop can then integrate with your accounting software to simplify and speed up any application for funding.
2. Make savings, cut your everyday costs
Right now, there are a number of savings Swoop can help you make across your cost base, e.g. in foreign exchange, utilities and insurance. On average, you can save up to $1830 annually by switching utilities and up to a whopping $10,690 annually in FX transactions fees. Discover savings like this with Swoop.
3. Sell your unwanted assets
Can you cash in on equipment that you no longer use, or inventory that might soon become obsolete?
4. Don’t buy it, lease it!
If you need computers or other business equipment, consider leasing them to avoid tying up cash. You can still expense the lease costs when you calculate your business taxes. And if you have an existing lease, you might be able to get better terms.
5. Be clever with your invoices
Given that many employees are working from home, don’t post invoices – email them. Make a quick phone call before you email so you know the best email address. Ask for more than one email address (or a general one) so that you can copy in at least one other person or department in case the person you called isn’t available.
It might seem obvious but make a point of sending invoices as soon as the work’s completed or products are delivered. If you are on the go or in a hurry you can create instant PDF invoices via a free invoice creator and send them straightaway by email.
Consider invoice finance as a way of borrowing money using your unpaid invoices.
6. Cushion your cash flow and boost working capital
Think about other ways to cushion your cash flow and boost your working capital. You might already have one or more of these in place, but consider the following:
- revolving credit line (even if you don’t need it right now, a line of credit is an easy way to delay cash flow problems. Think of it as an insurance policy. You might be able to get a line of credit using your accounts receivable or your inventory as collateral)
- business overdraft (if you need cash quickly or you want a safety net to use when you really need it)
- short-term or medium-term business loan (e.g working capital loan)
- invoice finance
- trade finance (if you’re dealing with international buyers and suppliers)
- business cash advance (e.g. merchant cash advance)
- asset refinance (sale and leaseback)
- purchase order finance (if you are a product distributor or reseller and need an advance to fulfil a specific order)
- R&D tax credit loan.
7. Speak to your customers
- Discuss with your customers how they are being impacted and how you can best support each other. Look for new customers who might have issues in their supply chain. There are always opportunities out there.
- Incentivise your customers to speed up payment by offering deals, for example a discount for early payment. Do some calculations first to make sure it’s a worthwhile trade-off between getting paid early and losing money in the long run.
- If you have not already done so, ask your customers for deposits or partial payments on large orders or longer-term contracts. For example, you might charge a 20% deposit upfront, then charge another 30% when you start work, and the balance when you complete. By charging this way, you can generate enough cash to finance any materials and pay your workers.
- If you sell products or provide services at customers’ homes or offices, consider using a mobile payment app. You’ll then be able to take payment on the spot using a credit or debit card with your smartphone or tablet.
8. If you have bank deposits, make them work for you
If you have cash sitting in your bank account earning little or no interest, especially in light of recent interest rate cuts, now’s a good time to look for a better home for it. Of course it’s still important to keep adequate funds for your cash flow needs, and enough headroom to cope with unforeseen circumstances. This might mean that managing your cash becomes a more critical activity in the future.
9. Consult ATO to agree a pay by instalment arrangement for tax
If you think you are going to struggle to meet your tax liabilities, you can opt for a pay by instalment plan with ATO. This would allow you to spread your business tax payments over a longer period of time. Call ATO on 13 11 42 or use ATO’s payment plan estimator to work out a plan you can afford.
10. If you have outstanding R&D tax credits, fund them with an R&D tax credit loan
If you have outstanding claims for R&D tax credits and/or claims that are likely to be delayed by the increased pressure on ATO, we can find funding for these in the form of a tax credit loan. This is a relatively new type of loan that uses your future R&D tax credit payments (from ATO) as security.
The main benefit of an R&D tax credit loan is that you can access funds within a week. This is helpful because you could be waiting many months before you receive your tax credit from ATO. Swoop can match you with the most appropriate provider for you.
You can discover your funding options at Swoop. Swoop simplifies and speeds up the funding process, matching businesses with the right funding opportunities tailored to your business needs. Simply sign up in less than 2 minutes and discover more!