• Business Growth & Optimisation

How to Cure the 6 Major Causes of Poor Cash Flow

6 min. read27.02.2022
By Team Zeller

Learn the main levers you can pull to improve cash flow.

Cash flow is a common source of stress in the merchant community. According to ABS figures, 48% of small Australian businesses have less than 3 months’ of cash on hand to cover operations, based on their business’ current level of revenue and expenditure. A further 12% can’t accurately estimate the funds currently held by the business.

Understanding which levers to pull to get more cash in, or to reduce cash out, is critical to the success of your business. While a healthy cash flow can create opportunities for expansion, poor cash flow will not only restrict your ability to grow — it will also add significant stress to business operations and remove that crucial buffer during quiet periods.

Cash flow stress is extremely common

Getting a handle on your cash flow is critical to ensure the long-term survival of your business. Without an accurate understanding of the amount of money flowing in to (and out of) your business, it’s impossible to know whether your business is a success. Yet it’s something many business owners struggle with.

More than a third of Australian business owners are forced to dip into their personal savings as a result of poor cash flow, impacting their ability to meet their own living costs. This has a knock-on effect on the broader economy; almost half a million small-to-medium size business owners admit that if their cash flow was in a more healthy state, they would employ more workers — in turn opening up approximately 500,000 jobs across small businesses in Australia.

Unfortunately, the reality is that poor cash flow is the cause of up to 40% of business failures. This dire statistic is evidence of the fact that neglecting it can have a serious impact on your business’ future growth. However, if you keep a watchful eye over your business’ cash flow, and mitigate any risks that could impact it, you’ll have funds ready for when it’s time to take your business into its next stage of growth.

To help keep your business' cash flow running smoothly, here are the major causes of an unhealthy cash flow and how to cure them.

6 factors that impact your cash flow and how to manage them

1. Stock uncertainty

Businesses have to straddle the fine line between too much inventory, and too little.

On the one hand, storing excess stock can be a real problem. You’ve footed the cost of acquiring goods, without reaping the rewards of selling them. Also consider the fact you’ve got to rent (or buy) a place to store that excess stock, and potentially increase your insurance threshold beyond where it needs to be. Holding on to excess stock is a costly mistake.

On the other hand, running out of stock leads to lost sales, reduced customer satisfaction and lower loyalty levels. Customers often feel let down when you can’t meet their needs due to a stockout.

This is where a point-of-sale system that tracks your inventory in real-time is key. Monthly, or even weekly, manual stock counts leave room for human error. Plus, they take up valuable time — and will be inaccurate the moment you make a sale.

With total transparency of your stock, you’re able to modify your purchase orders to coincide with higher cash flow periods, quickly identify inventory issues, and ensure every customer leaves your store with the product they intended to purchase.

2. Tax costs

Staying on top of your tax commitments is a simple way to avoid unnecessary interest payments, penalties, and time-consuming audits. Investing in accounting software will help you avoid missing the crucial deadlines that would see you incur them.

This is where it pays to do your research when looking for the right accounting tools for your business. However, accounting software is just one of the essential tools for running a business. Remember also to regularly check your Zeller Dashboard, which will tell you in real-time the amount of tax payable for any given month.

3. Late payments

You can waste a lot of time chasing up late invoices — and most businesses do, because in Australia they’re paid an average of 10 days late. For small businesses, that time delay bloats to 25.5 days. If you invoice customers, your business is likely losing a lot of financial freedom to delayed payments.

Having an invoicing software that helps you get your invoices created and in front of your clients as soon as possible is essential. Zeller Invoices is an all-in-one solution that helps build and send your invoices via email or SMS and allows your customers to pay online. The simpler the process, the quicker the payment.

Another option to minimise the cost of delayed payments is to implement shorter payment terms. Ensure to include clearly defined conditions for payments to make it clear that late payments are considered a breach of contract.

Alternatively, you could consider invoice factoring, a financial service that converts outstanding invoices due within the next 90 days into immediate cash. This money can help you stay afloat in the short term, providing the cash needed to pay your staff and expenses. However, it’s always important to assess the pros and cons of debt factoring. While it may seem an appealing option now, the interest charged can have costly future ramifications. There are many other options available to improve your cash flow, which will not eat into business profits.

The only way to put an end to late payments entirely is to take payment immediately. For that, you need a mobile EFTPOS terminal that can go wherever the job takes you, as well as accept over-the-phone payments. Read more about the benefits of having a mobile EFTPOS terminal.

4. High overheads

Running a business can be expensive. There are a number of operational costs — such as rent, utilities and software costs — which can eat into your monthly cash flow. This is particularly true if you’re locked into long-term contracts with hidden fees, which can quickly add up.

This is where it pays to regularly review your business expenses, and check for opportunities to cut costs. Whether it’s switching energy providers, reducing staffing levels, or making the move to an EFTPOS terminal with clear pricing and no hidden fees, there are business savings to be had.

Passing your EFTPOS transaction fee onto your customer through surcharging – also known as zero-cost EFTPOS – is an increasingly popular cost-saving measure for business owners. Learn whether surcharging is right for your business.

5. Slim margins

Operating on a thin profit margin can be an effective strategy for businesses just entering the market. Low prices are a strong point of appeal for shoppers, who may then be willing to abandon a competitor and become a long-term customer. However, slim margins will impact long-term business success by pushing the opportunity to grow your business back further into the future.

Make sure you’re aware of the all-inclusive cost of delivering each product or service. This understanding of the true cost of your offering will be crucial in your quest to get the price right. Once you’re aware of that cost, identify the weak points in your profit margins and consider either raising your prices, or dropping the least profitable product or service altogether. Learn how to choose the right pricing strategy for your business.

6. Loan interest

The pressure of paying staff, keeping on top of bills, and planning for costly overheads can make interest-heavy loans feel like your only option. However, for many businesses, loans can do more harm than good in the long run. It's essential to carefully assess your financial situation and explore alternative strategies, such as cost-cutting measures and revenue optimisation, before committing to a loan. Rushing into debt may exacerbate financial difficulties rather than alleviate them.


An all-in-one solution like Zeller can help you avoid these high-pressure situations by giving you faster access to your funds. Invoices can be generated at speed, and payments taken via Zeller Terminal are swept to your free Zeller Transaction Account nightly, and available for spending using your Zeller Debit Card the very next day. Plus, Zeller Dashboard gives you a bird’s eye view over your day’s takings in real-time, and enables you to easily compare business performance over different periods — helping you plan ahead for quiet periods.

Now that you’re aware of the importance of maintaining a healthy cash flow, it’s time to create your cash flow forecast.

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Your Top Cash Flow Questions Answered

Cash flow is the beating heart of business. A healthy cash flow circulates enough money to pay bills, compensate staff, fulfill invoices, and invest in future growth. Cash flow is critical to business success; lack of cash flow is one of the main reasons 50% of Australian SMEs go out of operation in the first three years. Without it, a business is likely to end up on the wrong side of the statistic. Yet while owners are growing increasingly aware that reliable access to available funds is the key to a successful business, 46% of small businesses remain cash flow negative — meaning more money is flowing out the door than coming in. Keep reading to understand the basics of cash flow, cash flow management and tips to improve your own business’s cash flow. What is cash flow? The term “cash flow” refers to the net money going in and out of your business. Ideally, it should be positive — as this gives you more room to pay bills, staff and invoices without seeking loans, adding further interest to your outflow. For this reason, a business’s ability to manage its cash flow typically determines its likelihood of success. What causes a negative cash flow? A big contributor to poor cash flow is late payments — when customers don’t pay their invoices in time, it inhibits your ability to invest, grow and employ . However, a more unsuspecting contributor to poor cash flow is slow access to the money your customers pay for your products or services. A delay in accessing your funds is usually a result of mixing and matching your EFTPOS provider and bank, creating a costly lag after every purchase. This delay can eventually lead businesses into a debt trap, as they’re forced to take out loans to ensure access to cash. What is sales revenue vs cash flow? Sales revenue is the amount of money earned from the sale of a business's goods or services. For example, when a bookstore sells a book for $45, this entire figure counts towards the store’s sales revenue. It is the total, gross amount of money coming into the business through sales. Cash flow, on the other hand, refers to the money going in and out of a business. It includes money that flows into the business in other ways, beyond sales. For this reason, sales revenue is an indicator of sales and marketing success, while the latter refers to a business's overall health because it indicates liquidity. Sales revenue and cash flow are both important figures to track; without them, it’s impossible to gauge the success of a business and make informed decisions. What is break-even point and how is it calculated? The point where your business breaks even is when your profit is zero and your cash flow is neutral. This means your sales revenue covers all of your outgoing expenses and your business can stay afloat without being propped up by cash loans. It’s from this point that a profit can start being made. There’s a simple formula you can use to calculate your business’ approximate break-even point — this will tell you the minimum number of sales your business needs to make to avoid a negative cash flow. Calculating your break-even point is also a useful way to understand the timing between getting paid and paying your own bills. You don’t want to be taking out a cash loan in order to pay suppliers and staff salaries purely because your funds are yet to be processed. For this reason, quick access to your takings is key. How to improve cash flow from operations? There are a number of ways you can feed your cash flow and maximise your liquidity. Take on-the-spot payments Service businesses often bear the brunt of delayed payments because they don’t have the ability to accept payment upon completion of a job, putting them at the behest of the customer — which automatically delays the inflow of revenue. A mobile EFTPOS terminal that allows you to take payments on the spot will help bridge that gap, meaning you don’t have to return to the office to invoice a customer — then chase up late payments. Add a surcharge Another way you can instantly up your cash flow is to pass your transaction fees to your customers via a surcharge. If you use the Zeller Terminal, this is something you can opt to do with every transaction — giving you access to more funds that you can then invest into advertising, product improvements or lower prices. Offer more ways to pay Something as simple as accepting new payment methods as they grow in popularity can open you up to a wealth of new customers. Plus, you won’t be reliant on a single source of funds throughout the month, minimising the risk of extended cashless periods. The Zeller Terminal allows you to accept payments via contactless devices and cards, chip and magstripe cards, and QR codes. Plus, you only pay a flat, low fee of just 1.4% per tapped, dipped or swiped transaction for every card type. How to manage personal cash flow? A good way of managing your business’s cash flow is by first mastering your personal cash flow . This means understanding your monthly earnings, setting realistic goals, budgeting for adequate spending, setting up auto-payments around payday, having emergency funds in place for unforeseen expenses, and siphoning off your surplus into a savings account. What's the easiest way to speed up cash flow? Achieving a positive cash flow is an integral step on the way to business success. Choosing a comprehensive payments solution like Zeller can help get you there. Access to cash will come sooner thanks to seamless connectivity between your EFTPOS Terminal , merchant account and business Mastercard . Plus, it all comes in the one box. Improving your cash flow couldn’t be more simple.

Tips for Protecting Your Business’s Cash Flow

Here are 4 tips to help you keep your cash flow under control. No matter how many sales are made, if your takings aren’t settled and at your disposal quickly, your business is going to struggle to scale up. As restrictions continue to ease across the country and businesses begin to reopen their doors, it’s the perfect time to take stock of where you’re at. For most business owners, the lifting of lockdowns marks the end of a significant period of disruption — one which has had a negative impact on cash flow. A recent survey undertaken by Xero, the accounting software platform, explains the current pains being felt by the Australian small business community are driven by a delay in invoice payments — which has a knock-on effect. 63% of the small businesses surveyed said their customers are often behind on payments, which affects a business owner’s ability to pay their suppliers, staff, and themselves. In fact, 24% of those surveyed said that they are currently delaying paying themselves. Keep reading to discover ways to protect and speed up your cash flow. The light at the end of the tunnel It’s impossible to predict what customer sentiment will be like coming out of lockdown. However, what we do know is that reopening is happening ahead of the festive season — the busiest time of year for many businesses. It’s highly likely that Australians will be ready to spend big. For example, as explained in the Zeller Hospitality Report , 25% of diners in metro areas are planning on dining locally more frequently than prior to the pandemic. This “revenge spending” phenomenon is likely to give all types of businesses a boost, as consumers begin splashing the disproportionate amount of cash saved during lockdown. This means there’s a good chance you’ll need access to extra cash to cover the costs of additional stock and staff. Here’s where good cash flow comes in; it can streamline this period of uncertainty by giving you the flexibility to adapt to demand. Why cash flow is critical to business success The term “ cash flow ” refers to the net money flowing in and out of your business. A positive cash flow gives you more room to pay bills, staff, and invoices without seeking loans — adding further interest to your outflow. For this reason, a business’s ability to manage its cash flow typically determines its likelihood of success. One of the reasons you might have poor cash flow is due to late payments. When customers don’t pay their invoices in time, it inhibits your ability to invest, grow and employ . And unfortunately, this means that 63% of small businesses themselves fall often behind on payments, causing stress for 35% of business owners. It’s a vicious cycle. Fortunately, there are a few things every merchant can do right now to improve their cash flow. Tips for protecting your business’s cash flow Track your incomings and outgoings closely One thing that can immediately empower you with greater cash flow control is full visibility of the money coming in and out of your business. Access to this information will provide you with a real-time read on the financial health of your business. Plus, it helps you quickly understand your short-term cash flow, allowing you to make more reliable business decisions now that can fast-track your growth in the long term. Something like the Zeller Dashboard will afford you this visibility, whilst also equipping your team with the insights to meet (and surpass) their targets. Plus, if you take a few minutes to set up Xero Bank Feeds , you'll get an up-to-the-minute view of incoming and outgoing Zeller transactions in your Xero organisation for streamlined reconciliation and analysis. Consider changing accounting software How much time do you spend managing your invoices each month? The average small business owner spends 12.4 hours a month managing their accounts — precious hours that could otherwise be spent reinvested in growing the business and speeding up cash flow. One way to get those hours back is by changing your accounting software. If you’re wondering whether your accounting software is hindering your efficiency, ask yourself these questions. Does it integrate with your other software tools, such as reporting, inventory management and email marketing software? Does it come with a mobile app? Is there support available when you need it? If you can’t answer yes to all of these questions, it might be worth researching accounting software options that are better suited to your business. Speed up your cash flow cycle The days between manufacturing a product or providing a service and the exchange of payment is what’s referred to as your cash flow cycle. It’s a measure of the amount of time it takes for your business to convert its investments into cash. While the length of this cycle tends to differ from industry to industry, no two businesses will ever be the act same. This is because every business’s cash flow cycle is influenced by a number of factors. Regardless of what industry you operate in, the goal should always be to reduce the number of days in your cash flow cycle — that’s how you boost your overall efficiency and free up more cash. As simple as that sounds, the average small Australian business is unfortunately forced to wait 25.5 days for payment. The total cost of these late repayments equates to a whopping $115 billion each year being withheld from small-to-medium business cash flow. Something as simple as replacing your EFTPOS terminal can help speed up your cash flow cycle. Not only does Zeller Terminal give you the ability to accept contactless mobile payments – making it easier for customers to pay immediately – but it also accepts a broad range of payment methods. The easier it is for your customers to make payment, the sooner you’re likely to get paid. Know your cash reality Now that you’re across the cash that’s coming in and out of your business, as well as how long it takes to arrive in your bank account, it’s time to work out what it’s costing you to keep the lights on: your daily burn rate. This can be worked out by dividing your total monthly expenses by the number of days in a month. This is the cash required to operate your business on a day-to-day basis. Once you know your daily burn rate, take the total amount of business funds in your bank account and divide it by that rate to determine the number of days for which you have cash on hand. If you’re feeling shocked at the result, rest assured — you’re not alone. Most business owners operate on nine to 12 days' worth of cash. While it doesn’t sound like a strong position to be in, it is indeed manageable. From here, however, make it your mission to get to a point where you’re operating with three to six months of cash on hand. It’s not the sweet spot for every business, but it is a good rule of thumb recommended by professionals. Understanding the length of your cash cycle helps you calculate an accurate cash-on-hand target. If you take payments via an invoicing system, your sales cycle will be on the longer side and you’ll need more days of cash on hand. If your business is largely transactional (i.e. customers pay on the spot), you won’t need as much of a buffer. The trick is understanding your business’s financial health and setting effective targets for improvement. Needless to say, these are strange times we’re in, but achieving a cash flow boost will help you navigate them more confidently and seamlessly. Now that you know how to strengthen your cash flow, it’s time to optimise every other aspect of your business for its return. Sign up to our Business Blog to cash in on valuable insights sent straight to your inbox. Please note this article is for educational purposes only. Zeller does not accept responsibility for the accuracy of the information presented in this article.

8 Small Business Money Management Tips

Here are a few simple steps to streamline the way you track your daily business expenses. Many merchants struggle to keep finances in order. Small business owners tend to wear multiple hats — from operations to HR, marketing and finance. There’s a lot to take care of, and it’s easy to understand why financial admin can slip to the bottom of the pile. Yet there are lots of good reasons why you should be tracking your business expenses. Aside from reducing the cognitive overload come tax time, keeping on top of your expenditure can you better manage cash flow and make informed, profit-building decisions for your business. Read on to discover some small steps you take as part of your day-to-day routine to keep on top of your business expenses. 1. Store your receipts properly Maximise your deductions at tax time by being diligent with retaining and documenting your receipts — your accountant will thank you. Keep your paper receipts in order by recording them in your accounting software, and then storing them systematically in the event of an audit. If you have a lot of paper receipts, consider converting them into digital formats (either by taking a photo or scanning them) to save on storage space, and prevent your receipts from fading or deteriorating over time. Alternatively, ask vendors to send you digital receipts via email or SMS — which is a money saver for them, and a space saver for you. Store your digital receipts securely, so that you can retrieve them as required. Just make sure that your system is backed up to avoid any heart-dropping mishaps. Most accounting software has the ability to attach the electronic receipt to the entry in your ledger, which makes it easy to search and retrieve the receipt as required. Zeller Dashboard tracks expenses in real time, and has a handy search function so that you can find specific transactions when you need them. 2. Open a separate business account Maintain a clear line between your personal spending and your business expenses by opening a separate business banking account — it’s one of the easiest ways to keep an eye on your spending. There are many good reasons why having a separate account is good for your business; it saves time, makes reconciling your expenses simpler, and it gives you greater visibility of what’s happening with your finances. It also means that you don’t have to explain your personal spending decisions to your accountant — or anyone else — come tax time. 3. Let accounting software do the heavy lifting Modern accounting software is more than a spreadsheet, it’s a complete system designed to keep you on track financially and save time. As such, there are many tasks that can be automated to reduce the amount of time you spend on bookkeeping. Most cloud accounting systems have the ability to connect directly with your bank feed, which updates your financial transactions in real time, and makes reconciling expenses a lot easier. Set aside a regular time each month, or more often if you have a lot of transactions, to go through your records and reconcile your expenses. If you use an expense tracking app throughout the day, your accounting software will intuitively match your bank records to the entry, and you’ll have minimal work to do. If you need help deciding which accounting software will meet your accounting requirements, read How to Choose The Right Accounting Software For Your Business . 4. Review your suppliers annually Brush up on your negotiation skills and you could save a few dollars. While some expenses may appear to be set in stone, in reality, there is usually room to negotiate to get a better deal for your business. Utility companies update their plans and pricing on a regular basis, so make it a priority to contact them every year to see if you’re on the best plan for your needs. Also consider bundling services, like your work phone and internet, to get a better deal and save. Loyalty can go a long way when it comes to negotiating with suppliers. If you’ve been trading with someone for a long time, keep an open dialogue with them about your needs. Most small business owners are prepared to be flexible in order to keep a loyal customer. And remember, not all negotiations have to be about money. You might not be able to barter on the price point, but you might be able to secure faster delivery at no extra cost — which may not save you money, but will save you time. When it comes to automatic contract renewals, make a diary note to review your contract two to three months before the renewal is due. This will give you time to advise your supplier if you find a better deal, and choose not to renew. Another approach is to negotiate the terms at the beginning of the contract. If a contract calls for automatic renewal, ask your vendor for an amendment to the terms giving you the option, not the obligation, to renew your contract within a window of time. 5. Wherever possible, fix expenses Expenses fall into one of two categories: fixed or variable. Fixed costs remain the same, irrespective of your volume of business. This may include things like rent, plant or machinery purchases, business registrations and insurance. The benefit of fixed costs is that they can be anticipated, and the expense accounted for. In contrast, variable costs can change depending on business needs, and may include labour, raw materials and utilities. While variable costs offer flexibility, they can also put your business at risk of overspending if not managed appropriately. Purchasing equipment or machinery outright is one way to fix your costs. Leasing tools can make it easier to get up and running, but will likely cost you more in the long run. By investing in your own equipment, you can reduce ongoing payments, which is good for your business cash flow. 6. Reduce your reliance on invoices For some industries, preparing and sending invoices, and giving clients payment terms, is regular practice. However, relying on invoices can mean a delay in getting your money. Reduce your risk, and the administrative burden of chasing up unpaid invoices, by transitioning to upfront payments, or collecting payments on job completion with a portabl. This will reduce the number of defaulted or delayed payments from clients, and get that money in your account a lot faster so you can focus on growing your business. 7. Keep your income and expenses up to date Regularly reconciling your expenses is one of the best ways to stay abreast of the financial health of your business. Knowing your numbers, whatever they may be, is critical for running a successful business. Achieving this also means knowing exactly what and how you’re being charged for each business service, including for the provision of EFTPOS services by  your payment provider . Seek out a provider who is open and transparent about costs, with no hidden conditions or fees. Better yet, look for a fixed transaction rate, and no account-keeping fees or ongoing equipment rental. At Zeller, we provide full transparency for our customers, with flat rate transaction fees and no ongoing costs. Our full-featured dashboard also allows you to check your numbers at any time, giving you 360 degree visibility of what’s going on with your business — from real-time transactions, profit comparisons, a summary of tax obligations and any refunds transactions that may require your attention. 8. Get professional help Investing in the services of a professional accountant can help maximise your savings and minimise your tax liabilities, yet the true value of an accountant comes from bigger picture thinking. A good accountant can also help you grow your business, by providing guiding advice on when to scale up and how. And while your accountant handles the financial details, you can focus on the building your brand and your customer base. An accountant should be a trusted partner in your business, so it pays to shop around to find the right person for your circumstances and ambitions. Finding a reputable practitioner is important, so ask around for recommendations of capable candidates from others in your industry. Other questions to consider are: What services do you need? Is this their area of expertise? What accounting software do they work with? What costs do you need to consider? Finding the right accountant is like finding the perfect pair of shoes. Once you’ve found the right fit, you’ll feel fully supported and ready to take your business to new levels. Keeping on top of the financial health of your business is one of the best things you can do to nurture a profitable and sustainable business. Managing your expenses may not be the most thrilling job in the house, however it can be one of the most rewarding. Appropriately managing business expenses will also have one of the biggest impacts on your bottom line, so it pays to embrace it with good practices and an optimistic outlook.

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