Australia has a tale of two economies right now, depending on the state or sector, prompting the nation’s largest non-bank SME lender to provide tips for business owners trying to manage cashflow in these two very different environments.

ScotPac senior executive Craig Michie said while these business scenarios were very different, there were common actions for business owners to take.

When it comes to managing fast growth or getting through difficult trading conditions, business owners must communicate clearly with their finance providers.

Also, SMEs trying to secure working capital for the business would be well served by looking at the assets on their balance sheet to find additional capital, Mr Michie said.

ScotPac’s tips for managing growth

Find a flexible source of funding

“Fast growth businesses need strong cashflow, as they have more cash held up in their debtor’s ledger. 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.”

“Another consequence can be 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,” Mr Michie said.

Negotiate with suppliers

If your need for goods places demands on suppliers that outstrip the terms they can give you, you’ll need a good line of communication to see if you can renegotiate terms.

“One option for fast growth businesses to have is to use trade finance. This ensures they can pay suppliers up front so they can meet their increased demand for product,” Mr Michie said.

Cashflow forecasting is a MUST

“It’s not unusual for a small business to spend months winning big new clients, then realise they had not accounted for the cashflow implications of winning new business,” he said.

“Putting in place a 13-week rolling cashflow forecast – which really would only take an hour with your accountant to set up, helps fast growth businesses avoid cashflow issues.”

ScotPac’s tips to ease tough conditions

Talk to your funder and the ATO

It’s crucial for businesses struggling through adverse conditions like the recent three state lockdown, and with NSW still facing uncertainty, to get into a dialogue with their financiers.

“Do this early in the piece to get the best outcome. Talk to your funder about whether it’s possible to restructure or to put in place moratoriums,” he said.

He said SMEs should not put off talking to the ATO about their position.

“Businesses make the mistake of thinking a problem ignored is a problem solved. Getting on the front foot with tax obligations is vital for your business to be a going concern.”

Look to your balance sheet for capital

Mr Michie said an SME trying to find more capital can look to the assets on its balance sheet to see what’s available to secure working capital for the business.

“To raise much-needed funds for the business, balance sheet assets can be a hidden resource for many SMEs – your debtor’s ledger, unencumbered plant and equipment and even inventory can be used to bring working capital back into the business.”

Again, cashflow forecasting is a MUST

Having in place a running 13-week cashflow forecast lets a business owner spot any cashflow gaps on the horizon, with enough time to do something about it.

This includes pulling levers such as reassessing your cost base, negotiating with creditors to defer payments or change terms, or running a blitz on aged receivables. This is important for businesses navigating difficult trading conditions as it is for fast growth businesses.

“Cashflow forecasting gives a business owner better control, because they have a very accurate view of how the business is trading,” Mr Michie said.