Of all the businesses launched in Australia, 60 per cent close their doors within the first three years. Of those that survive, most will stop growing almost immediately, becoming one of the country’s 2.17 million small enterprises.
While some business owners might simply not have major ambitions, most of them don’t fail to scale up by choice. Instead, they enter a cycle of stagnation, where they simply can’t find the time, or achieve the financial stability, that they need to grow while maintaining their current operations. Growth is only possible for businesses that manage to solve this problem by taking control of their working capital and their time.
Payment issues cost time and lead to financial instability
Achieving stable growth requires extensive planning and supervision. A business owner that doesn’t have the time to develop a growth plan is very unlikely to outcompete industry rivals and establish their company as an industry leader. Unfortunately, very few business owners could be described as having extra time on their hands. Small business owners are forced to deal with an enormous variety of responsibilities, from payroll, to management, to sales and marketing, to customer service, to collections. Almost no small business has the funds to delegate these essential tasks to other employees, leaving business owners to deal with them. However, if they want to grow, businesses have to find a way to make more time.
As it turns out, one of these tasks is not like the others. The average small business owner in Australia spends 8 hours per week chasing down late payments that their business has already earned. Acting as a de facto collections agent is a fact of life, because failing to do so often means not having the funds they need to cover business expenses. Business owners are so busy trying to get access to the funds they need to run their current operation that the very idea of growth seems ridiculous. They don’t have time to develop solutions to their payment issues or to plan for growth, leaving them and their business permanently stuck in the same position.
Stabilise working capital to reclaim your time
The unstable cash flow caused by unreliable payment, and the time lost attempting to address it, represents an enormous problem that needs to be dealt with before a business can begin to grow sustainably. Fortunately, businesses don’t need to find a foolproof way to get clients to pay on time to do this. Financial institutions like Fifo Capital offer tools that allow businesses to manage their working capital in a way that makes them far more flexible.
Supply chain finance
Supply chain finance is a way to pay suppliers without dipping into your current working capital. Instead of chasing down client payments in order to pay suppliers, you can simply pay suppliers immediately out of an investor furnished credit fund. The balance on that fund can then be paid off at a later date, and even deferred weeks or months after the supplier payment is due. Better yet, suppliers can offer discounts in exchange for early payment, reducing the cost for your business without actually forcing you to pay earlier out of pocket. This provides an enormous amount of flexibility to your business, and makes it much less risky to simply wait for a late payment to come in.
Another essential tool for any business that’s forced to deal with late payments on a regular basis is invoice financing. This allows businesses to simply trade invoices in to their financial institution for an up-front payment. They then collect the payment from the client on their own before paying out the rest of the value of the invoice, minus a fee. When working with clients that habitually pay late, this is an excellent preventive tool to ensure that most of the payment is available at a predictable time.
These tools allow businesses to get access to their revenue in a more reliable fashion, while also giving them the power to limit their outgoing payments. As a result, it becomes far easier to keep your available working capital at a steady level, and to build up and strategically invest additional capital to pursue specific growth opportunities. Additionally, it directly reduces the amount of time and effort you need to invest in actively collecting payments from clients. This frees up time to make structural improvements to your business, and to develop and implement a serious and sustainable growth plan.