Capify
  • Products
    • Unsecured Business Loans
    • Secured Business Loans
  • Partner with Us
    • Brokers
    • Partners
  • About
    • About Us
    • Careers
    • Contact Us
  • Resources
    • Blog
    • FAQs
  • Products
    • Unsecured Business Loans
    • Secured Business Loans
  • Partner with Us
    • Brokers
    • Partners
  • About
    • About Us
    • Careers
    • Contact Us
  • Resources
    • Blog
    • FAQs

1300 760 930

Get Started
  • Products
    • Unsecured Business Loans
    • Merchant Cash Advance
  • Brokers
  • Partners
  • About
    • About Us
    • Careers
    • Contact Us
  • Resources
    • Blog
    • FAQs
    • Small Business Loan calculator
  • User Login
Menu
  • Products
    • Unsecured Business Loans
    • Merchant Cash Advance
  • Brokers
  • Partners
  • About
    • About Us
    • Careers
    • Contact Us
  • Resources
    • Blog
    • FAQs
    • Small Business Loan calculator
  • User Login
User Login

Home » Featured » Best ways to Improve your working capital

Improve working capital

Best ways to Improve your working capital

  • July 25, 2022

As an integral component of working capital, cash is critical for small businesses. It ensures employees and suppliers can be paid if income is slow and profitability is delayed. But according to Capify’s Q1 2022 Confidence Survey*, a growing number of business owners are being kept awake at night by worries over cashflow.

 

The survey* found 35% of respondents citing cashflow as a major concern. Whilst a further 30% were concerned about Lack of talented workers/staff and finding new customers.

 

The survey, which featured the insights of local SME owners from a range of regions and industries, also found just under 60% of SME owners worried about the impact of rising costs and inflation on their businesses. 
 

These challenges appear to be contributing to a negative trend in the cash position of Australia’s SMEs. Over half of the survey respondents (53%) were concerned about the levels of cash held by the business, whilst 63% reported having less than $10,000 in the bank.  

 

We know that rising prices and staff shortages make trading incredibly challenging for a number of businesses at the moment. 

preventing from expansion
So what can SMEs do to better manage cashflow and improve its working capital position? Here are some of the working capital strategies-

1. Refresh your invoicing process

Small businesses must establish very clear payment terms before taking on a new client or customer order. Be sure to put in writing when payments for invoices are due, whether that’s immediately, or within 15, 30 or 60 days.

 

For larger orders or projects, which may incur heavier levels of expense, you might consider asking for a portion of the full amount to be paid on as the work begins. This will ensure you have some cash to cover those related expenses. The remainder of the invoice can then be paid on completion or upon reaching certain milestones or deliverables. 

 

You may also want to think about incentivising your customers to pay invoices early. A small deduction in the total cost of the order in return for early payment, will greatly improve your cash position without impacting profitability too dramatically. Read our blog 10 Cashflow management tips to safeguard your business in 2022 and beyond

2. Negotiate with your suppliers

Proactive and regular communication with your suppliers will put you in a good position to negotiate better terms. Once you’ve understood your expected annual outgoings, you may be in a position to offer suppliers early payments in return for a reduction in price.  
 
You may also consider partnering, or bulk-buying, with similar businesses to increase your buying power and improve your negotiating position. The current cost increases are putting huge strain throughout the supply chain. Negotiating fixed costs on materials, services or stock may well help your medium-term cash position.  

3. Make sure the price is right

Experiment with your pricing models to ensure your customers are paying a price that aligns to your business objectives.

 

When developing a business plan, SME owners often feel their pricing strategy should match the lowest-price provider in the market. This can be a mistake which can impact cashflow and profitability. 

 

SME owners should conduct research on the market they operate in and regularly analyse what your competitors are pricing at and what the highest price the market can tolerate is.

 

You should also look at how variable, or elastic, your pricing can be. Depending on the nature of your business and the number of competitors in your space, your price may be able to increase without significantly impacting demand. This is more true of need-to-have products or services with fewer competitors.  

 

For those companies selling larger, higher-cost products, you may consider offering finance terms to your customers to aid the sales process. You can make these higher capital transactions easier by partnering with a finance company to offer repayment terms to your customers.

 

Rather than a large upfront payment which, subject to invoice terms, may take time to clear, this allows customers to pay a fixed monthly fee. The finance partner takes the risk of providing the loan for the goods/services and you enjoy getting paid as soon as the finance has been agreed and the goods successfully delivered to the customer. This also presents an up-sell opportunity, as you may be able to bundle maintenance and service support as an incremental element of the monthly fee.

4. Get on top of your inventory

Smart control of your inventory is a good way of improving cashflow and profitability. Inventory sales generate cashflow but purchasing inventory requires a cash outlay that impacts your cash balance. 

 

Holding excess inventory (based on current sales forecast and demand) means using available cash to pay for the surplus inventory and converting current cash into non-cash assets.

 

Performing regular inventory checks and analysing which products are selling at what rate, will minimise risk to your cashflow by ensuring you are only replacing the lines in demand.  

 

For inventory that is not selling, you may need to sell it at a reduced rate. It can often seem counter-intuitive, but holding onto valuable stock which isn’t selling can be disastrous for an SME.

 

Some small businesses will still require external finance to improve their working capital position until top- and bottom-line growth improves. For many firms, external finance can prove a valuable short-term option to help improve the business’ cash position.  

 

Read our recent blog, Cash Flow Loans for Small Businesses: Are they right for you?

To conclude, by following these helpful hacks, you should have a better understanding of how working capital can be improved.

 

Always remember that your vision as a business owner is the force that sets your business to motion, but it is the decisions that you make along the way that will keep it moving towards the direction you wish it to turn. Through responsible spending, mindful collection, and making the most of your available assets, your company will have the capital it needs to succeed.

 

At Capify we offer a range of financing options and business loans to help support your business through high and low periods. Check to see if you’re eligible for one of our loans with our online eligibility checker. Or, if you’d prefer to talk to a member of our team, we’d be happy to guide you through the process. Give us a call today on  1300 760 930

**For more details about Capify’s Q1 2022 Confidence Survey, check out the document here.

Capify does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Considering finance but unsure where to start? Give our team a call on 1300 760 930 or click Get Started. We’re here to talk through your needs and help you access funds in as little as 24 hours.

SHARE THIS POST

Categories

Small Business
Money & Finance
Productivity
Mindset

Recent Posts

Unlocking Success: How to Secure an Equipment Loan for Your Small Business

2025 Capify partner event recap

EOFY 2025: 5 Last-Minute Tips for Small Businesses

Related Blogs

Previous
Next
Products
  • Unsecured Business Loans
  • Secured Business Loans
Partner with Us
  • Partners
  • Brokers
About
  • About Us
  • Careers
  • Contact Us
  • User Login
  • Complaints
Resources
  • Blog
  • FAQs
  • Privacy Policy
  • Terms of use
Capify Australia
Facebook-f Instagram Linkedin-in Youtube

Copyright © 2026 Capify is a trademark licensed to Ausvance Capital II Pty Limited (ABN 91 630 468 156). All Rights Reserved.