Ranked by the World Bank as the easiest country in which to start a business, New Zealand has in many respects become the poster-child for entrepreneurship. But after you’ve started the business is where things can get tricky.

With around 8,000 small enterprises with staff (between 1-19 employees) established each year, small businesses account for 97 percent of all enterprises in this country.

With only half of all small businesses surviving beyond five years, business owners face some serious challenges when venturing out on their own.

According to Xero, on average, only 50 percent of New Zealand’s small businesses were cash flow positive in the past year. In addition, our own research suggests that at least one in five Kiwi small business owners has come close to going out of business due to serious cash flow issues.

Cash flow is the lifeblood of any business and one of the main reasons businesses seek finance. So what could small business owners be doing better to stay (or get) out of the red?

Be clear and prompt with invoices

With the average invoice paid more than eight days past its due date, it’s no surprise small businesses are suffering!

Make your invoices as easy as possible to follow. Be upfront about your payment terms, clearly outline the necessary details and ensure they’re sent in a timely manner.

Create an invoicing schedule that you can stick to – including scheduled reminders, so customers are prompted ahead of the due date. Automation can also streamline your process and make it much simpler to adhere to your schedule.

Experiment with marketing

Research commissioned by Prospa shows that SME owners most commonly identified a marketing campaign as being the best investment they could make to help grow their business – even more so than hiring new staff.

Marketing can be an extremely cost-effective way to drive customer engagement with minimal risk, but you might want to experiment with different strategies and monitor results, before committing to a full plan or campaign.

A successful marketing experiment also uses specific measurable goals.

Consider giving test marketing a go. You could try it out by selling products on a limited basis (before a full product launch) or test various channels by sending out discount vouchers (via eDM, social media etc) to see what optimises sales and enhances customer engagement.

And, don’t be afraid to ask your customers for a point of view! It can be one of the perks of being a small business and a great way to engage with your customers directly.

Review your business overheads regularly

Overheads are ongoing expenses that aren’t directly related to a business’ products or services such as utilities, insurance, taxes and salaries. In many businesses, there are opportunities to reduce these costs without impacting the quality of your products or services.

Interrogating any smaller business costs such as subscriptions, insurance and supplier costs can help you find ways to save money – they all add up. You might try getting competitive quotes on a semi-regular basis and surprise yourself with what you can save!

Understand your cash flow variables

It’s important to recognise your cash flow position at any given moment and identify where the peaks and troughs are.

Accounting software can help you understand and see at a glance, how your cash flow is tracking. It can also assist in detecting the products, areas of business and seasonal changes that are impacting on your business the most.

Creating a cash flow plan will help you understand if you might need additional funds to stay on track and mitigate any surprises. Being prepared for seasonal ups and downs, tax payments and one-off costs can also help you reach your goals faster.

Thinking about finances and the future of your business can be overwhelming.

If in doubt, ask for help – a financial adviser has the experience and expertise to make your business more efficient and profitable. They can also help with establishing internal accounting processes and find ways to turn your cash flow around.

Adrienne Church is General Manager at Prospa New Zealand

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