Steps like upgrading your accounting software, reviewing your costs and staying on top of invoicing can help with cash flow concerns.
Opening a dedicated business account and separating all transactions is the simplest way to stay audit-ready and understand your real profit.
Apply for credit before you actually need it; healthy financials increase your approval odds and keep your business prepared for growth or setbacks.
As a small business owner, you know cash flow can be tricky. Between chasing invoices and paying employees, making your small business finance work can often feel like balancing on a tightrope. In this guide, hopefully, you'll find a few tips that will ease the cash flow crunch.
Tips on where to start
Review and upgrade your accounting
Review your current accounting measures and consider how well they are working for you. If you haven't already, hire a good bookkeeper or purchase DIY accounting software – even if you're a small business, a spreadsheet just isn't going to cut it. It is crucial that you keep accurate track of your income and costs.
Review your costs
This could be an obvious one but when things get busy, it's easy to lose track. So, make sure you're keeping track of all of your small business expenses. These can add up quickly, but reviewing them allows you to fine-tune where your money goes.
Make financial projections
Having clear financial projections is important. If you don't know where you want to get to, how do you know how you will get there? And more importantly, how much you need to spend along the way? Your main business plan will help you to anticipate and address possible future obstacles.
Don't get slack on invoicing
Send out invoices as soon as possible after providing goods or services. Set payment terms of seven days to make sure that payments are not forgotten or lost in the process. Always follow up on sent invoices. You can make this easy by creating set templates for email or SMS follow-ups. Reference invoice numbers and cross-reference these with payments.
Finder survey: If you were going to start a small business, where would you get the money?
Response
A business loan
44.98%
I have savings
37.47%
Friends/family
6.03%
Government grants
5.94%
Other
4.8%
Crowdfunding
0.79%
Source: Finder survey by Pure Profile of 1145 Australians, December 2023
Tips for separating business and personal
Keep a separate business bank account
Mixing business money with your personal finances is a recipe for unexplained losses and tax-headaches. Keeping your business's money separate will make gauging profitability easier and help you to keep proper track of your expenses.
Keep track of what you put into your business
Keep accurate records of what you loan to your business. When your business starts making money, you can easily pay back the director's loan first before paying tax on the remaining profit.
Pay yourself first
This doesn't mean taking away all of the business' profits – start with 10% of the earnings. This is a good way to set aside money consistently and to test the profitability of your business. It also provides a safety net for unexpected expenses.
Remain frugal
Even though you pay yourself, don't get sucked up in the benefits of business ownership even if you can afford it. Set your salary as low as you are comfortable with and offer government-mandated benefits only. What you save now will give you more flexibility in future lean months.
Keep travelling costs to a minimum
Travel can be a great investment for your business – if it's done right. Don't overspend on luxurious travel and accommodation. This sets a bad precedent for employees and can be an unnecessarily large cost with little return. Plan your business trips as if you were paying for them yourself.
Tips to take care of the bigger business issues
Don't let legal fees get out of hand. Look into reasonable costs for legal fees and consider whether your business can afford it. When engaging with legal services: Make your expectations clear to your lawyer when procuring their services. Choose the billing option that is the most cost-effective for your business, for example, hourly or per project. Ask whether it is possible to defer payment until the project is funded.
For the more simple necessities, consider DIY legal documents
There are various kinds available online – why spend more than you need to?
Take care when expanding
Make sure expansion is done steadily and wisely. Pushing large amounts of money into expansions that are too quick and too drastic can be disastrous.
Hire a consultant for marketing and PR
If you have the capacity to complete marketing and PR efforts yourself but don't have the expertise, hire a consultant. You can gain the benefits of their expertise without paying for their services long-term. You just need to be willing to put in the work yourself.
Consider renting instead of buying
Leasing equipment instead of buying helps you avoid maintenance costs and can also prevent you from overpaying on equipment only needed for a specific period of time. You could also consider looking into other cost-saving measures, such as shared workspaces or renting out your own office space to others.
Don't wait too long before seeking a loan
An easy mistake to make is waiting until your business is in financial trouble before applying for loans or other credit. This is exactly when you will be least likely to receive financing. Apply when your financials are still in a good state. This way the loan can be used for expansion or as an emergency line of credit when you need it.
Make sure you have enough capital
Small businesses often do not have enough capital to get themselves through the startup phase. To prevent this, have three months' living expenses saved plus the amount you are expecting to need for the first three months' business expenses. Plan as if you expect to receive no business revenue.
Don't spend prematurely
Don't go big on business cards, sign writing, marketing materials, cars or inventory before any actual revenue comes in. This can create a cash flow blockage.
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As a small business owner, if you're struggling to get your invoices paid on time, invoice financing could be an option to consider. It's a type of business loan that is secured by the unpaid invoices and comes with reduced risk, no asset requirements or interest payments.
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The right tools and approaches will help you and your business thrive – these tips and trends can help you find them.
Frequently asked questions
The right finance option depends on what you need the funds for, how quickly you need them and your ability to repay. For example, a term loan might suit long-term investments like new equipment, while a line of credit can help with ongoing cash flow needs. Comparing different products and speaking with a financial adviser can help you narrow down your options.
Yes, but it may be more challenging. Lenders usually prefer businesses with an established financial history, so new businesses may need to rely on alternative lenders, personal guarantees or secured loans. Providing a solid business plan and evidence of strong sales projections can also improve your chances of approval.
Many lenders prefer a credit score of at least 600, but some alternative lenders are more flexible. The stronger your credit history, the better your chances of being approved and accessing lower interest rates. Businesses with weaker credit can still qualify through specialist lenders, but will likely face higher costs.
It depends on the purpose and amount of finance you need. Business credit cards work well for smaller, recurring expenses or to manage cash flow, while business loans are better for larger, one-off purchases or investments. Consider the interest rates, fees and repayment flexibility of each option before choosing.
Yes, unsecured business loans are available, though they often come with higher interest rates and stricter eligibility criteria. Lenders assess factors such as your revenue, trading history and business performance before approving unsecured finance.
Traditional bank loans can take from a few days up to several weeks for approval, depending on the complexity of your application. Online and alternative lenders may offer same-day or next-day approval, particularly for smaller amounts. Having your documents ready-such as bank statements, tax returns and identification-can speed up the process.
Yes, some lenders specialise in offering finance to businesses with bad credit. You may pay a higher interest rate or need to provide collateral. Demonstrating consistent business income and providing supporting financial documents can help strengthen your application.
Yes, various federal and state grants support small businesses, particularly those focused on innovation, exporting, or job creation. These can be highly competitive and may have strict eligibility requirements. You can explore options through the Australian Government's business.gov.au grants and funding search tool.
Keep accurate financial records, reduce outstanding debts and ensure your credit score is in good shape. A clear business plan that explains how funds will be used and repaid also helps lenders assess your reliability. Comparing several lenders before applying can ensure the best fit for your business's profile.
Common fees include application fees, monthly account-keeping fees, early repayment fees and late payment charges. Some lenders may also charge origination or processing fees. Reviewing the comparison rate rather than just the headline interest rate gives a clearer picture of the total cost.
Elizabeth Barry is an experienced journalist with over 10 years of expertise in personal finance, contributing to outlets like the ABC, Sydney Morning Herald, and 7News. She holds a Master of Arts in Creative Writing and a Bachelor of Arts in Communication from the University of Technology Sydney, and has earned multiple award nominations, including a Highly Commended recognition at the 2017 Lizzies. Elizabeth began her career at Finder in 2013, progressing through roles to become Lead Editor, where she oversaw a wide range of personal finance coverage until 2024.
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A peer-to-peer business loan from innovative lender Zool Capital may be a consideration if you’re looking for business finance and we can show you how it works.
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