Cash flow is the lifeblood of every business. Many business owners run into the occasional cash flow problem, but problems escalate quickly when outgoings continuously exceed revenue.

Managing cash flow is one of the most challenging aspects of running a business. With COVID-19 wreaking havoc on the small business sector, 61% of small businesses worldwide are currently struggling with cash flow. When cash flow becomes a problem, so too does the ability to pay suppliers and manage debt repayments.

If you’re facing the same cash flow issues month after month, it’s time to develop new ways to handle your finances. Stabilize your cash flow with these seven surprising tips and take your business from struggling to success.

1. Review your invoicing schedule

Your cash flow relies on the payments you receive for the services you provide. Invoices mean very little unless they’ve been paid, which is why you shouldn’t hesitate to send invoices as soon as possible. This may require adopting a new invoicing schedule where you invoice on completion of work rather than waiting for your monthly invoice date to roll around.

2. Lease your equipment and vehicles

Business owners can lease equipment and vehicles to avoid losing significant cash flow on initial outlays. With less of your cash flow tied up in down payments and purchase prices, leasing improves your financial flexibility. Leasing is beneficial for businesses struggling with cash flow for a number of reasons, including:

• • Lease payments are tax-deductible.

• • Maintenance costs are the responsibility of equipment suppliers.

• • It’s easy to upgrade leased equipment and vehicles.

• • Depreciation of vehicles and equipment is the responsibility of the supplier.

3. Change your accountant

It’s not enough to have an accountant. You need a good accountant that takes a proactive, not reactive, approach. The right accountant will help your cash flow situation and stabilize your finances long term. The wrong accountant will only exacerbate your financial struggle.

If your accountant is hard to reach, uses excessive jargon or bombards you with high fees, it might be time to switch. Look for an accountant who:

• • Communicates with you regularly.

• • Plans ahead with projected income statements, budgets and revenue.

• • Gives you the tools to make better financial decisions.

• • Optimizes your tax position with all applicable credits and deductions.

4. Adjust inventory to customer behaviour

Inventory costs have a high return on investment as long as they have a fast turnaround. Unsold inventory is revenue lost and puts a significant strain on your ability to pay outgoings. Addressing inventory concerns starts with recognizing the stock that’s less frequently purchased. Read customer trends and adapt accordingly, so you’re only replenishing stock that sells well.

5. Improve your tax position

Tax time is incredibly stressful for business owners and even more so for those already struggling with cash flow. Few business owners are aware of the steps they can take throughout the year to make them less vulnerable to a large tax bill.

While claiming expenses and finding tax credits are great ways to reduce your tax bill, it’s how you pay your tax that will have the biggest impact on cash flow. By setting money aside throughout the year as places like Tax Traders do under New Zealand’s progressive tax pooling system, you can avoid that end of year bill altogether.

6. Borrow before you need it

Borrowing money shouldn’t be the ambulance at the bottom of a cliff. Running a business requires a lot of financial foresight, and the best time to solve a problem with cash flow is long before it happens.

Securing a loan at a low interest rate is much easier while cash flow is healthy. When times are tough, you may only qualify for a loan with an alternative lender who are notorious for high interest rates. You may not need to use the full loan amount, but you’ll have a cash flow boost and an emergency buffer for unexpected events.

7. Utilize new technologies

These days, our access to new technologies that monitor cash flow is nothing short of endless. Business owners who adopt new technology as part of their financial strategy have a massive advantage in avoiding cash flow struggles. From apps to software, new technology slashes your time spent on financial admin and gives you more time to focus on your business. Useful cash flow technologies include:

• • Accounting and bookkeeping software that streamlines your financial processes such as Quickbooks or Xero.

• • Expense monitoring apps like Accelo that can be shared among staff to keep all expenses in one place.

• • Inventory management systems including Acumatica, Syspro, and Accountmate that help you avoid hours of manual stocktaking.

Cash flow health is the make or break of business success. As we continue to grapple with COVID-19, an increasing number of businesses are on the verge of collapse. Take measures to minimize the impact of the pandemic and improve your cash flow situation for future stability.