How to improve your business' financial position

It may be a good idea to do some financial housekeeping before you start looking externally for funding. Getting your finances in order and sorting out any financial issues before you seek finance will give you a better chance of success.

If you haven't already done so, consider talking to an accountant or business adviser about your financing needs and options. If your funding needs are relatively small, an adviser or accountant may be able to suggest other ways of improving your cash flow situation or provide options for sourcing funding internally. Some ways you can improve your financial position and cash flow include:

Recover outstanding debt

Chase up as many outstanding payments as you can. If you don't have the time, consider outsourcing your debt collection with a reputable debt collection agency. Before you make a sale, always make sure you have a condition of sale agreement in writing that outlines the terms and conditions of the sale including how long your debtors have to settle the debt and any percentages applied for overdue payments.

Reduce/rearrange expenses

Analyse all of your expenses and figure out which of these you could reduce or rearrange. Some options include:

  • arranging a deferred or periodic payment plan for larger expenses
  • switching insurance companies, banks or suppliers to get a better deal
  • modifying the quantity and/or timing of your stock purchases to coincide with higher cash flow periods
  • switching to cheaper alternatives for consumables.

Sell assets

Selling unwanted assets can be a good way to get some cash and reduce your storage costs. You could also consider leasing your main assets to help spread the cost over a longer period.

If you’re selling on terms, such as retention of title, or leasing out valuable goods, consider registering a security interest on the Personal Property Securities Register (PPSR). Registering a security interest in goods that you’re selling can help you recover the debt if a buyer doesn’t pay or becomes insolvent.

Offer markdowns

Applying markdowns to full-price products or services can attract sales and shift surplus stock or discontinued products. If you're offering markdowns, ensure you always comply with pricing legislation. See the Australian Competition and Consumer Commission (ACCC) for more information on pricing and your obligations. See our Analyse your finances page to calculate your Markdown.

Increase prices

Increasing prices can be a valid option for businesses facing rising costs, even if it's not popular with customers. If you consider this option, ensure your prices always comply with pricing legislation. Check the ACCC for details about pricing and your obligations.

Consolidate debt

Look at your current debt and see if you can combine it all into a low interest and low fee product. When considering refinancing your current debt arrangements, make sure you shop around to see if you can you get a better deal elsewhere.

Use new marketing techniques

Putting more effort into marketing doesn't necessarily require spending more money. For example, using the internet and social media can be a cheaper and smarter way of getting your message across.

Offer additional payment options

Offering additional payment options such as credit, e-commerce, or additional payment systems (e.g. BPAY, BillPay or PayPal), can open up different markets and improve your bottom line.

Look for government grants

Generally, the government doesn't provide finance to people who want to start up or buy a small business. However, you may be eligible for a grant in certain circumstances such as business expansion, research and development, innovation or exporting. Search Grant & Assistance to find support for your business.

Invest your own money

Investing your own money or that of your family or friends may give you a better chance of obtaining finance. Generally, lenders require a certain amount of equity (own funds) invested in the business before they will lend you money. Before you decide on this option, you should first carefully consider how this arrangement can affect your relationships.

What to do...

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