How to improve cashflow management for your business

5 minutes

Business tips

A well-planned cashflow can make the difference between a business that just survives, and a business that thrives

Improving your cashflow isn’t just relegated to your financial team. Here are a few smart solutions you can employ to boost your cashflow, without resorting to cost-cutting, stock-cutting, or downsizing.

What is cashflow management?

Your business cashflow is the total amount of money that comes into your business through sales, and leaves your business through your expenses. Cashflow management is the act of tracking this money—and it’s a crucial step for regular, sustained business growth.

The importance of good cashflow management

Without good cashflow management, you’re effectively blindfolding your business.

Keeping a close eye on your business’ cashflow each month ensures that you always know how much money you currently have, how much is scheduled to come in, and how much you need to keep to pay your suppliers and staff. 

Having a clear record and forecast for your monthly business cashflow means you can ensure you retain a positive cashflow. This record allows you to gain insight into where your money is spent, where you receive it from, and then analyse this data and use this to create an accurate budget for the future. Importantly, it also allows you to know how much you can re-investment into your business to drive further growth. 

6 ways to improve your cashflow management

Yes, cutting down on costs and increasing your prices does boost your cashflow, but it doesn’t necessarily improve how your cashflow is managed. Here are six smart, effective tactics you can employ to improve your business’ cashflow management.

1. Create a cashflow forecast

All the data you’ve gathered on your business’ finances allows you to generate a cashflow forecast. This is a critical tool for businesses—it’s the roadmap that tells you where you’re going. With a thorough cashflow forecast, your business is able to plan effectively for the future. 

Using this historical data you can estimate your projected incomings and outgoings, and be better prepared for the highs and lows that come with running a business. It’s also a useful tool to measure your business’ performance and see whether you’re out-performing or underperforming, compared to your previous years.

2. Delay your payments and pay suppliers on the invoice’s due date

One benefit of good business cashflow management is that, when done right, it enables you to maximise the interest you generate on the funds you have in your business bank account .

By sending payments to your suppliers on their specific due date, rather than any time before, this enables your business to keep funds in your account for longer. These funds sit in your account, generating daily interest until it’s time to pay your suppliers. These small amounts of interest add up and are an effortless way to increase your income.

3. Make your money work for you

Putting your funds into a high-interest savings account enables you to earn a competitive interest rate on the money currently sitting in your account. This further compounds the value of paying your invoices on their due date and is a low-effort way to improve your business’ cashflow. After all, every little bit helps.

4. Match payment terms

A smart way to improve cashflow is to ensure that both your customer and supplier payment terms are the same. For example, if you’re offering your customers 45-60 days’ payment, but your suppliers expect your payment within 30 days, this creates a large gap in your cashflow. Matching these two up means that there’s no payment vacuum, and your income and outgoings always operate to a regular cycle.

5. Take advantage of ‘continuity’ sales

Consider offering a deal to your customers on products or services that they purchase for a set time period. For example, you might run a subscription-based business such as a magazine, or a cybersecurity service. Your customers usually pay monthly for their subscription. 

One way to improve your cash flow is to offer an up-front deal for a longer period subscription, say for one year, or even two years. Your customers save money upfront on the price of their subscription, and your business receives the cash upfront.

6. Save on international transaction fees

As the world becomes more borderless, more businesses will be making international transactions, however, banks still charge significant fees on these transactions. The banks typically charge 4-5% above what a peer-to-peer payment service provider may charge on international FX rates. For card payments, they typically charge 3% on every international transaction. 

If a business is spending $500,000 on international transactions, they could improve their cashflow by up to $20,000 a year just by finding a cheaper alternative. 

Improve your cashflow with Airwallex

Airwallex is an Australian fintech that allows businesses to put all of these tactics into effect. 

Airwallex enables you to:

  • transfer funds to your international suppliers directly in their local currency, so they’re received faster. Payments can be sent and received on the same day, so you can hold off on paying invoices until the day they’re due. Lighting-fast payment means you never run over time.

  • access interbank FX rates and save up to 90% versus the Big Banks

  • generate virtual cards online that have zero international transaction fees

You receive a detailed log of all your income and expenses, which means you generate accurate, reliable data for your cashflow forecast. This data means you’ll never be caught short. Best of all, there are no monthly fees and a business account can be set up all online in minutes. 

See the difference Airwallex payments can make for your business’ cashflow.

Get in touch with us today to organise a demo and learn more about our favourite solutions that will help your business thrive.

Our products and services in Australia are provided by Airwallex Pty Ltd ABN 37 609 653 312 who holds AFSL 487221. Any information provided is for general information purposes only and does not take into account your objectives, financial situation or needs. You should consider the appropriateness of the information in light of your own objectives, financial situation or needs. Please read and consider the Product Disclosure Statement available on our website before using our service.

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