Escaping cash flow stagnation: Groundhog Day lessons for NZ SMEs

“What would you do if you were stuck in one place, and every day was exactly the same, and nothing that you did mattered?” Groundhog Day

Waiting for the NZ Reserve Bank to give an OCR update feels a bit like watching everyone’s favourite Groundhog, Punxsutawney Phil, emerge to predict whether spring will come early. All based on whether this particular woodchuck sees its shadow. Or not.

It’s a gamble.

There are also no prizes for pointing out that in a stagnant market, kiwi SMEs can only survive on sluggish cashflow for so long. Either we wait for something to change, or we pull levers to change it. June 2024’s Retail Radar report on business confidence shows how many of us this applies to. “Almost 43% of respondents are unsure whether they will survive the next 12 months.”

Being stuck in the current NZ recession does remind me of the rom-com classic Groundhog Day.  Weatherman Phil Connor (Bill Murray), trapped on 2 Feb, relives the same day until he learns to change his behaviours and perspectives. Unsurprisingly, this pivotal change includes changing the way he treats people. Only when Phil reviews his approach can he escape the time loop and – spoiler alert – benefit from the process.

Similarly, SMEs might want to reassess their current BAU models, focusing on resilience and innovation in ways that support the P&L but also improve their customer experience (which…you know…drive sales #justsayin). It’s easier said than done, but an open, inquisitive mindset is critical right now. To paraphrase Ray Dalio, you’ll unlock new pathways and creativity when you can see your blind spots and identify opportunities or pitfalls.

Core levers to drive cash flow in a down market and forecast better

Before you take up intensive piano lessons to kill some time while the markets sort themselves out, there are some more practical levers you can pull to get cash flow and business moving. We’ve established that as a precursor, mindset and adaptability allow us to consider new models. Business model innovation begins with a Discovery phase, even if it’s a simple one. Being on top of economic trends and policy changes will help SMEs prepare as things change.  To survive, you’ll need to consider how things have changed first. And listening to your customers will help too.

Do your cash flow homework by understanding the New Terrain of Business

There are plenty of insights to garner from organisations that make it their business to keep SMEs looking outside their backyard. A model we like at Good CX  comes from Mark Divine, ex-Navy Seal, who talks about paying attention to how the “terrain has changed”. He uses the VUCA model (Volatility, Uncertainty, Chaos and Ambiguity) as a framework to assess what new ‘internal maps’ you need to upgrade to before you set out. If you feel your business might be navigating on old ‘navigation software’, start by upgrading your understanding of the new business terrain. The idea is to shift to a new VUCA of Vision, Understanding, Clarity and Agility. Shifting your perspective means removing some bias and finding some fresh thinking.

NZ Business Magazine helped open up more cash flow conversations in their latest free online issue, “Conquering the Cashflow Conundrum.” Firmly encouraging SMEs into the driver’s seat, they encourage shifting mindset from ‘Survive til 25’ to ‘Grow in 24’. Together with the Icehouse, they gathered a room full of innovative thinkers as a catalyst to encourage SMEs to shake things up. Hearing cross-industry ideation helps our team build on thinking, and in this instance, the panel (led by mag editor David Nothling-Demmer) from Kiwibank, Tax Traders and KPMG have solid ideas.

5 Levers of Cash flow: tips & ideas to get moving

Improving cash flow is not just about cutting costs; it involves strategically positioning your business to take advantage of opportunities while also mitigating risks. SMEs can pull several actionable levers to enhance their cash flow. Stu roughly summarises the outtakes in simple commercial terms like this:

What Can Be Done to Improve Cash Flow? 5 tips for uptempo cash flow workouts

1. Pay Quick – Inventory Management: Optimising inventory involves managing stock levels to meet demand without overcommitting resources. By utilizing just-in-time (JIT) ordering and advanced forecasting techniques, you can minimize excess inventory and reduce storage costs. Equaling quicker payments to suppliers and improved cash flow.
2. Pay Slow – Payment Terms: Extending payment terms with suppliers can help. By negotiating longer payment periods, businesses can retain their cash longer. Use the cash to invest in growth, tech or fractional advisory or cover unexpected expenses without jeopardising their operational capabilities.
3. Get Paid – Cash Collection: Swift cash collection maintains liquidity. But these can be hard convos to have. If you’ve set up payment terms well, it will be easier. If you need to do this retrospectively, some advice from On Your Terms is an inexpensive way of sorting it. Implementing strategies such as offering discounts for early payments, sending regular reminders, and leveraging invoice financing can accelerate the collection process. This ensures that cash is consistently flowing into the business, reducing the risk of cash shortages. Our friends at SME Financial have some other good ideas about this here.
4. Free Up Cash – Access Provisional Tax: An innovative product we’ve come across recently is Taxi. Tax Traders recognised the consumer insight that businesses could manage their tax obligations more efficiently. Kyrstal Brough from Tax Traders explained that companies can free up cash that would otherwise be tied up in tax liabilities by accessing provisional tax payments and optimising tax strategy. This allowing for reinvestment in core business activities or other cash flow needs. All makes sense.
5. A thought from us: Bridge – Short term Funding: But here’s another tip we’ll mention while we’re look at the actual coffers.  In the short term, innovative fintech like Fundtap can allow you to access short term funding. Fundtap provides immediate access to short-term funding, helping businesses bridge cash flow gaps quickly and efficiently. By leveraging their receivables, companies can soften financial stress during lean periods. This enables SMEs to focus on growth and operations without disruption to their cash flow. Fundtap’s Head of Growth, Shane Laurence,  told us: “83% of business failures are directly attributable to a lack of cash flow. Our experience shows it’s not always a systemic cashflow issue but a cashflow timing issue – the difference between when money is going out the door and coming back in. Utilising innovative methods to bridge this gap can help businesses thrive.

“Sales Fixes Everything”: Get Your Sales Pipeline Unblocked

“The line I’m hearing a lot right now is that ‘sales fixes everything'”, says Stu Reed.

As customer-first consultants, we want to stress this point here. Sales are made to Customers. Actual people, who are also in their own personal Groundhog Day right now.

Let’s be clear. If you fail to put your customers first and consider why they are or aren’t buying, you’ve missed a trick:

Customers are not Tinder dates. Consider:

• Why they’re buying slowly,
• How you can help them buy
• Why are they buying from someone else

Your share of the wallet should be 100% front of the mind. And that means turning your attention to your customer. Even BDO agree that “A quality customer experience can make all the difference when it comes to customer attraction and retention.”. Don’t look after your customers; you’ll soon have fewer sales. Fewer sales? Well. Less cash flow.

3 ways to be more customer-centric and improve sales (and of course, cash flow)

The ultimate way to improve cash flow is to get more customers and, therefore, sales. A new approach might be useful if the old model isn’t working. Have a think about the following:

1. Increasing sales to existing customers is easier than finding new ones. Naturally, that’s because of cost (and energy) of acquisition. And as all comms people know right now, most businesses are dithering on any form of promotional spending. You need to look beyond paid channels. This means working on utilising your owned and earned customer channels effectively.
2. Why is the customer you don’t yet have not interested OR with someone else? This is the perpetual question Phil Connor asks himself during GroundHog Day as he tests out ways to make Rita fall in love with him. Like Phil, you’ll have to get creative and gather some ‘insights’ on the object of your desires. In this case, how to woo paying customers. Understanding your customers is really important. Seriously. I mean it. Understanding of what drives your customer should be placed above spring cleaning your stock room right now. By gathering some insights, even just from desktop research, to take a dipstick of Voice of Customer. Inexpensive tools like Push My Button or Simplesat, you could put some simple changes into play to convert them to sales pronto.
3. Look for where your customers get stuck. New or existing, where are your customers getting stuck in their interactions with you? Therefore, if your sales pipeline is slowing, use your data (i.e. web analytics, sales team feedback, surveys or reviews) to try and establish where the points of friction might be. Be open to finding out what part of the customer experience might be turning off your customers. Maybe playing “I Got You Babe” on a loop for your call centre hold music isn’t their vibe. I dunno. We can help you find the holes in your bucket.

A little unbiased external coaching can go a long way when you can’t see the wood for the trees

If it turns out your cash flow is already going gangbusters, and you are a dab hand with Excel, it could be that you might need to focus on your customer sales funnels and establishing how you can nudge them along.

Chat with us about easy ways to reignite the dialogue with your current customers or how to diagnose a problem.  If you’re an SME and worried about budget, chat to the good people at the Regional Business Network explore getting some advice from us. Sometimes a 90 minute quickie with us is all it takes to hatch an actionable plan.