Turning the tide on cash flow challenges

Cash flow pain is not a new business issue, but there’s a new solution for it.

We know from the last Xero Small Business Insights report (September 2022) that almost half (45%) of all payments made to businesses in New Zealand are late. Local businesses are spending on average four months of the year in negative cash flow. And comparative data going back to 2018 tells a similar story.  

Unfortunately, this was a business ‘norm’ even before the added challenges of ongoing pandemic-induced supply chain pain and rising inflationary pressures. More than ever, cash flow looks set to be cash slow. 

Let’s imagine, for example, that you have a wholesale furniture business, and your cash flow pain is worse than ever. Your core product is made overseas, so you’ve had to order far greater stock volumes (this has also increased your warehousing costs), because ongoing supply chain issues have forced you to move from just-in-time to just-in-case stockholding. Now you’re trapped in a position with consumer belt-tightening in an economic climate that’s widely predicted to get worse, before it gets better.

And what do most businesses do when cash flow pain disrupts business operations and ambitions? They look to borrow. For the small to medium enterprises (99% of all NZ businesses), this often means lending is secured against the family home. And in an environment where the value of the home may be declining, the whole proposition becomes a lot more complicated, alongside the wider challenges that can be associated with anchoring personal assets to the business in the first place.  

The good news is there’s a better way.

But let’s back up to your imaginary furniture business for a moment to explain how. Let’s say you come up with a great promotional plan for the year, just enough to stimulate demand, but not enough to lock you into low price expectations in the future. You’ve got orders coming in from stores, but their payment terms are 60 days after delivery, and your staff, freight, and warehousing bills are due now. 

With BNZ’s new CashFlow Plus, eligible businesses can borrow up to 80% of the value of an approved invoice, as soon as the product is delivered, instantly releasing cash into the business. The invoices are the security, so there’s no longer the reliance on traditional forms, such as a property.

With a solution like CashFlow Plus, suddenly, there’s instant cash flow agility, offering room for both operational mobility and growth in the business. This is what cash flow freedom can do. It’s also a fast, seamless integrated web-based process, so our early adopters are reporting administrative savings too.

What could this do for the thousands of businesses typically hampered by the ‘norm’ that is late payments? And what about all the ambitious enterprises in growth mode? I for one, can’t wait to find out. To learn more head to our Cash Flow Plus page.

This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article. Any opinions in this article are not necessarily shared by BNZ or anyone else.