Managing cash flow is crucial for any business, but it becomes even more critical during periods of growth. As your business expands, so do your expenses, and without proper management, you could find yourself in a cash crunch. Worse, because your business has been growing, it can be difficult to understand how the cash has run out, which can then take time and resources to get to the bottom of and may result in you needing to stall growth, or even reduce the scope of the business.



The good news is that it is possible to stay on top of cash flow through growth.

The first step in managing cash flow is understanding your cash flow cycle. This involves knowing when cash comes into your business and when it goes out. This means accounting for seasonal fluctuations. For example, retail businesses often see a surge in sales during the Christmas period but may experience a slowdown in the months following. It’s important to ensure that your cash flow doesn’t rely on a seasonable business perpetually enjoying the seasonal sales volume.

Having a cash reserve is like having a safety net. It can help you cover unexpected expenses or periods of low cash flow. Aim to have at least three to six months’ worth of operating expenses saved. If you need it to fuel growth, then use it, but be mindful that it’s going to me important to refill the reserve before the reserves are burned through.

One of the most common cash flow issues for growing businesses is late- or non-payments from customers. To mitigate this, ensure you invoice promptly and follow up on overdue payments. Consider offering incentives for early payments or implementing late fees for overdue invoices. 

As your business grows, it’s easy for expenses to spiral out of control. Regularly review your expenses and look for areas where you can cut costs. This might involve renegotiating contracts, finding more cost-effective suppliers, or reducing discretionary spending. Keeping a close eye on your expenses can help you maintain a healthy cash flow.

Negotiating favourable payment terms with your suppliers can help improve your cash flow. For example, if you can negotiate 60-day payment terms instead of 30 days, you have more time to pay your bills, which can help you manage your cash flow more effectively. Building strong relationships with your suppliers can also lead to more flexible payment terms.

Inventory management is crucial for maintaining healthy cash flow. Overstocking can tie up valuable cash, while understocking can lead to lost sales. Use inventory management software to track your stock levels and sales patterns. This can help you make more informed decisions about when to reorder stock and how much to order.

Cash flow forecasting is a powerful tool for managing your cash flow. By predicting your future cash inflows and outflows, you can identify potential cash flow issues before they become a problem. Use accounting software to create detailed cash flow forecasts and update them regularly. This can help you make more informed decisions about your business’s finances.

During periods of growth, you may need additional financing to support your business. There are various financing options available in Australia, including business loans, lines of credit, and invoice financing. This is an area that Business Growth Finance can be a strategic partner to your business with on an ongoing basis, so discuss with us how the right financing can support cash flow outcomes.

Regularly monitoring your cash flow is essential for maintaining healthy cash flow. Set aside time each week to review your cash flow statements and identify any potential issues. This can help you catch problems early and take corrective action before they impact your business.

Finally, it’s essential to plan for growth and not just hope it happens. As your business expands, your cash flow needs will change. Create a growth plan that outlines your business’s goals and the resources you’ll need to achieve them. This plan should include detailed financial projections and a strategy for managing your cash flow during periods of growth.

Managing cash flow during periods of growth can be challenging, but with the right strategies in place, you can maintain healthy cash flow and support your business’s expansion. If you have any questions or concerns, then speak to the team at Business Growth Finance. As your strategic partner and business finance broker, our goal is to support your business, and our team has a long history of helping organisations achieve sustainable growth.