Finding money within your business

Most small businesses experience cash flow problems from time to time and sometimes urgently need working capital. Many business owners immediately think of bank overdrafts or loans when they’re short of money. But there may be other resources you can tap into before you ask for that expensive overdraft or overdraft extension. The money you need might already be there—locked up in inventory, assets or your debtors.

You can often free up funds from within your business by re-examining your business systems and processes, and, even if the funds you free up from within your business are not sufficient for immediate short-term cash flow requirements, there is another payoff; the effort you make in freeing up cash, helps to ensure that you are running your business in a more efficient manner for the longer term.

To free up funds from within your business, look closely at:

  • assets
  • customers
  • suppliers


Your assets include debtors, stock, pre-paid expenses, vehicles, plant and equipment, fittings and property. Each of these is a possible source of funds.


Are you letting some customers have the free use of your money for months? This is a common occurrence in small businesses where the owner(s) are so busy getting the business off the ground, products out the door, or services completed, that they don’t pay enough attention to basic business procedures around Debtor Management. Many customers will take advantage of this ‘free money’. But your business is not to serve as a free bank.

Here’s how you fix the problem:

  • Get invoices out promptly. Whatever else you do, become efficient at getting invoices out early. This is your future cash flow—the lifeblood of your business! You want to receive it as soon as possible. Start this new system NOW.
  • Send the invoice with the goods or immediately the service is completed. Date the invoice from no later than the day it is sent rather than following the standard ‘last day of the month’ date for invoices. The earlier the invoice date, the better your chances of getting paid earlier.
  • Change the terms for existing customers where possible, and for new customers. For example, can you ask for immediate settlement or set reduced payment terms such as 7 days or 14 days from date of invoice?
  • Follow up promptly when invoices aren’t paid by due date. This is critical. Be polite but firm. If you haven’t the time to do this yourself, then appoint someone to do it for you.

Monitor your debtor collection days and set an improvement target each quarter. For example, can you find out the benchmark standard for your industry? If the average in your industry is 30 days, but you are taking an average of 45 days to collect outstanding debts, then there’s clearly room for improvement. If your customers or clients have been taking advantage of you because of your previous laxity in invoicing and follow up, then you may need to re-educate them by putting in a phone call to discuss. Do this politely so you don’t offend customers. If you are not comfortable doing this (perhaps you personally hold and maintain customer relationships), consider assigning this task to someone else so you don’t have to personally have uncomfortable conversations.

Consider offering a discount for prompt payment.  Discounts are not a good option for low-margin businesses, but can be an option for high-margin operations. You have to work out whether the use of money gained earlier is worth the discount you’re offering. NEVER give the discount if the person has missed the due date for the discount offer. (Yes, some will try this on.)

Maybe Direct Debit could be suitable for your business.  Automating payments with a direct debit system is a fabulous way to improve debtor payment days.  If you are not comfortable changing the payment system for existing clients, you could phase it in with your new clients.

Check to see if your Accounting Software has any built-in payment solutions.  If you are using a product such as MYOB or XERO, you already have a solution at your fingertips that can be activated and can provide quick and easy methods for your clients or customers to pay you.  Remember, the easier it is to pay you, the better chance of getting paid sooner!

Ask for progress payments.  If you supply goods over a period of time, or if you’re a service business, ask if you can invoice for progress payments. This is quite a common method of ensuring you get some cash flow during a project instead of waiting until the end of a project or delivery period to invoice—and then still waiting at least another 30 days for payment. There’s another benefit here too. If the customer turns out to be dodgy, you’ll discover this quite early on instead of at the end and you can cut your losses before they mount up and perhaps drag your business down. This tactic is therefore very suitable for tradespeople subcontracting to a developer.


Do you have excessive capital tied up in stock? This can occur in two ways:

  • carrying high levels of items that you could obtain from suppliers at short notice
  • having too many slow-moving items (and too few fast-moving items).

A quick sale?

Review regularly your stock levels, your stock turnover rates and your purchasing policies. Can you free up money by reducing stock? What about moving out of the slower-moving lines or having a quick sale of dust-collecting stock? It might pay you to reduce some items quite heavily to get some money in quickly.

Can you approach suppliers to take back any excessive stock you may have ordered? They might help you out of a temporary tight corner as a goodwill gesture if you explain you have a temporary cash flow crisis, but that you do wish to build a long-term relationship with them.

If you need additional funds to purchase more stock, make sure that you’re replacing slow-moving stock with the faster selling lines.

Pre-paid expenses

This is another area you could look at. These pre-paid expenses often relate to services. For example, you might pay your insurance bill for the year all in one hit, but you could arrange to pay small monthly amounts. There might be an additional cost for doing this, but you must weight the extra cost against the advantages of 12 small payments which your cash flow can comfortably handle versus one large annual payment. Try a similar approach with your accountant. Instead of facing a substantial bill once a year, ask if you can pay a set amount monthly.


Assets can drain significant amounts of cash out of a business. Do you really put all your assets to full use? You might be able to:

  • Sell off little-used assets and hire suitable replacements when you require them.
  • Lease or rent assets and equipment that depreciates rapidly such as computers and or vehicles


Consider your suppliers as a possible source of funds. If you currently don’t have payment terms with your suppliers, have a chat to them to discuss this option, this will give you the opportunity to sell the goods before you have to pay.  If you already have payment terms, ask for extended payment terms.  If the supplier isn’t willing, try this tactic; split the order in two and offer to pay normal credit terms (30 days) on the one half of the order and (90 days) on the other half. Your suppliers may be more likely to agree to this kind of arrangement if you’ve paid them promptly in the past. After all, they have a vested interest in helping you succeed.


Take advantage of discounts

Pay accounts that give discounts on time. This is an easy one. If any suppliers offer a discount for early payment, then take it (and there is no harm in asking for a discount).


All the above options are suggestions and some may not be suitable for your business. Feel free to contact us to discuss ways to find money in your business.

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