Your Top Cash Flow Questions Answered

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 . Want more valuable insights, delivered straight to your inbox? 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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.

What was once the go-to option for making purchases is fast becoming a thing of the past. Cash is no longer king. The most recent Consumer Payments Survey , conducted by the Reserve Bank of Australia (RBA) every three years, paints a bleak picture for the future of physical currency — and poses a problem for cash-only businesses. In 2019, 32 per cent of all in-person payments were made using cash. However, those purchases accounted for just 19 per cent of all in-person purchases. Three years prior, in 2016, 43 per cent of in-person payments were made using cash, accounting for 30 per cent of purchases. It’s a steep rate of decline that’s hard to ignore. As cash use continues to fall, and electronic payment methods become the go-to option for consumers, it becomes obvious that it’s not just a good idea to accept credit card payments for your small business — it’s vital for long-term success. Luckily, it’s surprisingly easy to start accepting credit card payments in Australia. Keep reading to learn more about the shift away from cash, why this change of preference impacts your business, and how to keep your customers happy by providing credit card payments as an option. Why do some businesses still operate as cash-only? A surprising number of businesses remain cash-only, despite the obvious benefits of accepting credit card payments. Among these are often food trucks and other street vendors, nail salons and some restaurants and coffee shops. Reasons for cash-only The decision to remain cash-only could be for a number of reasons; it could be due to something as simple as preference towards cash and resistance against change, or lack of a stable internet connection, or tax avoidance, or something else entirely.  The most commonly cited reasons for not making the switch to accept more modern forms of payment are: no credit card processing fees no waiting for payments to clear more straightforward accounting However, none of these reasons make it a more affordable option for business. In fact, not accepting credit cards could be costing a business in more ways than one. Perceived benefits don't outweigh the costs Providing no other option but to pay with cash can be a frustrating experience for a customer. It might even cost you their business. Research undertaken by the Australian Tax Office shows Australians are twice as likely to consider a cash-only payment experience as negative, rather than positive. That means operating as cash-only can have an impact on business reputation. That’s just one reason why knowing how to accept credit card payments in Australia is essential. The ATO has also done the maths to figure out whether accepting cash payments makes sense, from a financial standpoint, and discovered that processing a cash payment actually costs businesses nine cents more than processing a tap-and-go payment — while also taking about twice as long. Operating a cash-only business can cost you customers. Cash: kept on hand but not put to use Paper currency and coins will continue to play a role in payments well into the future. There’s no reason to think you won’t have at least the occasional customer who wants to pay for a purchase, especially a small one, with hard currency instead of a card. However, it’s becoming less and less common. The RBA has tracked a consistently downward trend in coin and currency payments since at least 2007, and the demographical data strongly suggests this trend will continue. Although older generations are still hanging on to their cash, just four per cent of 18 to 29 year olds make payments using cash on a frequent basis. Over time, that means this move away from cash will only become more noticeable. While it’s true that there was an injection of $11 billion worth of physical currency into circulation throughout the coronavirus crisis in 2020, the RBA has reported that this cash was stockpiled — not spent — suggesting a lack of confidence in the economy. Australians are keeping more coins and cash on hand, but you won’t necessarily see it flow into your business. Instead, your customers are continuing to turn to payment options beyond currency. Options for accepting credit card payments for small businesses All this talk of broad economic trends and data has an incredibly relevant point: your customers want to pay with a credit card and, as a business owner, your goal is to bring in revenue. So, how can you start accepting credit card payments at your business? The short answer is you need the right tools in place to accept credit card payments at your business. An Electronic Funds Transfer at Point Of Sale (EFTPOS) machine and a business account are the foundation of your business’s ability to process credit cards. This combination allows you to accept payment by processing cards in person, and then access your funds. There are plenty of options available to your business. An EFTPOS machine linked to a merchant account provided by a Big 4 bank is the most traditional. However, the process of applying for a business account and then ordering and setting up a payment terminal is often slow and time-consuming. A bank’s standards may even box out some smaller companies and new businesses without credit history or operating history. This route also isn’t typically the cheapest way to accept credit card payments in Australia, and it can take a number of business days for funds to reach your merchant account. That means your merchant account can actually be a bottleneck to your cash flow. An online merchant gateway , like PayPal or Stripe, is one option for e-commerce ventures. However, accepting in-person payments using an online gateway is often clunky and requires a number of workarounds; you’re effectively entering your customer’s details as if you were them. This is likely to leave your customers less than thrilled about the experience — and you and your staff consistently spending extra time on an everyday task. SME-focused alternatives Pairing a modern EFTPOS payment terminal with a banking alternative to the Big 4, such as a neobank, is an option many business owners are now considering. Frustrated with the lack of support traditional banks provide to large enterprises, small and business sized business owners are looking beyond the incumbents and setting their sights on more forward-thinking providers. When you take payment via Zeller Terminal , funds are settled into your Zeller Transaction Account on the same day — giving you fast access to your funds. Spend the money you make using your Zeller Mastercard as soon as funds clear. It’s the quickest way to speed up your cash flow and grow your business.