What levers can you pull to improve your cash flow?

By Darryn McAuliffe, National Manager, NAB Franchise Banking

This article appeared in Issue 3#5 (July/August 2009) of Business Franchise Australia & New Zealand

In the current challenging economic climate, franchise owners need to be aware that without proper financial structure, planning and support, the risk of failure increases.

To be successful, a business needs to balance the cash flowing in and the cash flowing out. You need to consider what levers you can pull to improve your cash flow in the short, medium and long term. 

Control & Reduce Operating Expenses

There are times in all businesses’ lives when the belt needs to be tightened to free up cash. To do this, many franchisees are taking control of their expenses. 

Before cutting costs, it’s important to fully understand the true cost and profitability of everything you do. Before making any changes, you need to get your back-end systems in order so that you can truly understand if there are any holes to be filled, any leakage you don’t know about, any lost sales and, depending on the nature of your system, any unbilled stock. Having this control and faith in the numbers before making any decisions is crucial.

Business Tips

  • Walk the floor and talk to people involved in all the processes of your business. It’s staff who are the most capable of identifying ways to reduce costs and help recognise any hidden inventory (a major pool of trapped cash).
  • Set new expense targets and gain ownership and buy-in from staff. The objective is to have staff critique all spending as if the money was their own.
  • Your franchisor may also be able to assist you in reviewing the efficiency and effectiveness of your business.

How your bank can help

Making Payments

Payment of your suppliers can often be the overlooked piece in the cash flow chain. Methods such as direct debit can often be an efficient payment solution for meeting supplier and staff costs. Consider using Corporate and Purchasing Cards that defer your payments and operate as monthly charge cards.  They are also ideal for the management and monitoring of business related expenses.

Talk to your bank about restructuring your existing finances

Switching from Principal and Interest repayments to Interest Only, or extending the term of your loan are just two ways in which NAB Business Franchise Banking Specialists are helping customers navigate through the current economic environment.

Release cash invested in fixed assets 

When it comes to competitive advantage, operational efficiency is the investment with the greatest long-term return.  Keeping your income producing assets up-to-date is a primary way in which you can help keep your business efficient and stay ahead of the competition. However, how these assets are funded and the amount of cash locked into these assets needs to be reviewed.

Look at your investment in fixed assets. Identify excess assets - especially buildings, surplus equipment and non-productive assets - and look for ways to convert them to cash. See if additional investment in technology or more productive assets might improve overall profitability. 

Consider Sale and Leaseback

Investigate more capital-light financial solutions such as Sales & Leaseback to free up the working capital locked in your operating equipment or vehicles that you own, without disrupting you business. Most depreciable assets can be funded – vehicles, plant and machinery, office and IT equipment. 

Vehicle & Equipment Finance

Our Asset Finance Specialists have been working with customers to understand their vehicle and equipment finance needs and providing solutions within their budgets. These can help reduce their operating costs, increase productivity, whilst freeing up cash. In addition, replacing old with new may provide peace of mind in the form of a manufacturer’s warranty.

For example, a Queensland outdoor furniture specialist had to update their truck. They had planned to buy a second hand truck, but a NAB Asset Finance Specialist demonstrated that they could actually buy a new truck at a lower cost. Adding in the peace of mind of a new warranty and lower servicing costs – this proved to be a great decision that matched their cash flow needs.

Create certainty by protecting your profits from fluctuating rates

In uncertain times, protecting your future cash flow from the effects of other external influences can be a smart move. To create certainty, successful businesses have risk management solutions like fixed or partially fixed interest rates to minimise risks and maintain profits. 

Having the right insurance cover to protect your business from unforeseen events will help prevent the undermining of the best laid business plans.

Combination Loan

Your bank can offer a Combination Loan tailored to match your cash flow needs with interest charging cycles, interest charging dates, repayment cycles and repayment dates able to be aligned with your anticipated cash flow. It also provides the ability to swap from a variable interest rate to fixed interest rate and vice versa during the term of the loan.   


You’ve worked hard to build your business. You owe it to yourself, and your family, to protect it. Your bank can help you get the insurance cover you need to secure the future of your business – in a way that suits your circumstances and your budget.

For example, if a coffee store franchisee fell seriously ill but had the right business protection in place, they could be fortunate enough to have enough cash coming in to hire a replacement manager to meet the short-term needs of the business.

Use your networks

Staying close to customers is a good practice at any time. It becomes increasingly important when conditions tighten. Improving customer relationships can create opportunities for new and repeat business – especially from your most loyal customers.

There is a reason why someone chooses to buy from you and not a competitor. Knowing your customer, and the reason they purchase from you, allows you to plan for the future.  It helps you project future earnings and plan for what your business will need to not only survive, but prosper - regardless of the economic environment. It’s our experience, that businesses that continually focus on understanding why their customers choose them, don’t generally get caught out when those consumer needs change. 

Also, now more than ever, is a good time to be talking to your team of experts, like your accountant, your financial adviser and your Business Banker, about your business, where you want to take it and what the economic environment means for you. The broader your network, the more likely you are to be connected to someone who can help your business. 

A retail franchisee from New South Wales told me they were always promoting their business, whether it be at BBQs, via friends, to loyal customers or suppliers. But they have been surprised by the amount of new business coming via the internet. Their advice is that you have to be online. 

Business Tips:

  • Ask your best and most loyal clients for referrals. It’s these people who most recognise the value in your product or service and will be most willing to refer you to new business.
  • Get connected to your industry leaders via seminars, local franchise events or online blogs. This will help expand your network of contacts and possibly create new sales opportunities.  For example, State and Local Chamber of Commerce, Franchise & Industry Associations and other networking groups.
  • Read trade and industry journals, speak to industry bodies and take advantage of any resources to available to you.
  • Get online!

NAB LogoFor more information go to www.nab.com.au/franchising

Important Notice: NAB has not taken into account your objectives, financial situation or needs and recommends that you consider whether any advice in this release is appropriate for your circumstances.

Darryn McAuliffe is National Manager, NAB Franchise Banking. He is responsible for the NAB’s team of accredited franchise bankers and for the ongoing accreditation of franchise systems across Australia. nabbusiness Franchise Banking Specialists understand franchising and can offer you a flexible and competitive finance solution to help your business prosper. You can contact Darryn at darryn.r.mcauliffe@nab.com.au or 0412 789 027.