Whether a business has trouble keeping up with fast growth or getting through difficult trading conditions, ScotPac advised business owners to consult with their finance providers to survive either extreme.
For thriving businesses, Craig Michie, senior executive at ScotPac, said that owners should look for a flexible source of funding to ensure a strong cash flow.
“It’s important to find a source of funding that grows as your business grows. With invoice finance, as your debtors grow, so does the line of credit you can access,” Michie said. “[There is] a demand on the business to put in place more capital assets, such as vehicles and equipment. In these situations, asset finance can help a business get the assets they need to support their rapid growth.”
He also noted the importance of renegotiating terms with suppliers, especially if the demand outstrips original terms. This ensures that owners can pay suppliers upfront to meet the increased demand for their product.
Meanwhile, struggling business owners should consult with funders and the Australian Taxation Office as early as possible to restructure or put in moratoriums.
“Too many businesses make the mistake of thinking a problem ignored is a problem solved – getting on the front foot with tax obligations is vital if you want your business to be a going concern,” Michie said.
Michie also advised to check balance sheet assets, as they are often a “hidden resource” for funds. From unencumbered equipment to obsolete inventory, these assets can help bring working capital back into the business.
Successful or otherwise, Michie said all businesses should practice a 13-week rolling cash flow forecast. Doing so allows owners to avoid issues, spot gaps early, and reassess the situation with more time to spare.
“Cashflow forecasting gives a business owner better control, because they have a very accurate view of how the business is trading,” Michie said.
