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Options to cover cash shortfalls in your business

4-minute read

The need to cover cash shortfalls can happen to almost every business, and in some seasonal industries it’s almost the norm. So, while you’re planning for positive cash flow, it’s also important to factor-in unexpected expenses and any periods when your business slows down.

Key take-outs
  • Create a cash flow strategy
  • Consider finance options
  • Take more control of payments and expenditure
  • Review your overall businesses finances

Supporting your cash flow

How can I improve my cash flow? Virtually every businessperson asks themselves this question at some point due to concerns over negative cash flow, which can be a common cause of business failure.


That’s why it’s essential to have a strategy in place for cash shortfalls, however short-lived the situation may be. Here are some steps you could take to potentially help tide you over seasonal slumps and unexpected demands on your cash.

Access short-term finance

A business overdraft1 can be an important part of business finances, giving greater flexibility in business cash flow. It’s a little like a temporary loan, and the interest charges applied are usually tax-deductible – but it’s worthwhile speaking with a tax adviser about this. 


Business overdrafts can be secured or unsecured. If you wish to avoid offering an asset in the form of residential, commercial or rural property as security, and you want to borrow less than $250k you may be eligible for an unsecured business overdraft1.  Please note that a director’s guarantee will be required if you are a corporate borrower. Or for larger amounts paid off over one to three years, you could consider an unsecured business loan.


A business credit card1 with an interest-free period could be another way to help  spread expenses and manage cash flow. It can be used for emergencies – and provided the balance is paid off by the end of the interest-free period, this could help you manage the peaks and troughs of your business cycle.

Collect debts and negotiate better terms

If you have a debtor who is late then you may want to talk to them about having the debt cleared, even if it’s in instalments. Early resolution is usually the best outcome as escalation into a court matter can be expensive and time consuming.


Unfortunately, some companies build dragging out payments into their cash flow strategies, meaning that chasing payments from them may need to be a part of your own strategy. Where achievable, short settlement periods from clients are preferable – and it’s good to have an agreed contract between you from the start. You may even negotiate that they pay up-front for some or all of your services. 


Try to work with clients who pay on time, and don’t forget to let them know you’re grateful for their prompt payments.

Review your cash flow procedures

It might be a good idea to put some measures in place to keep the cash flowing your way. For instance, think about the benefits to your business if you:


  • Ask for 50% in advance. For large transactions, it’s not unusual to request a half-payment at the beginning of the work.
  • Keep on top of your accounts. Invoice as soon as possible. Follow-up gently as soon as money doesn’t arrive.
  • Explain your terms up front.
  • Have rigorous credit policies.

Extend your terms

At the other end of the cash flow spectrum are the payments you need to make. Consider if these options would work for you:


  • Hold off on making payments and repayments until the last day possible.
  • Approach your suppliers and ask them for a longer grace period, in line with your debtors.

Review your expenses

Losing control of expenses can be an issue for small businesses. Keeping them under review and control is important. Stick to your budget as much as you can.

Clear excess stock

Liquidating stock is a quick way to put some cash in your till and clear the shelves.

Use invoice finance

For an alternative way to support cash flow you may wish to consider Westpac Invoice Finance1, which (if you are approved) allows you to access up to 85% of the value of your outstanding invoices on an ongoing basis. This can be an effective way to finance your business and get access to a growing pool of funds as you grow. 


You can use the funds available to purchase additional stock or pay your suppliers early and ask for a discount. The invoices act as security, so no real estate security is typically required. Minimum borrowing amounts may apply, and credit criteria, charges and fees apply. 

Review your overall business finances

It’s a good idea to talk to your bank business manager about ways to structure your business finances. Maybe you might wish to consolidate some of your debts into a business loan1? Or perhaps you are thinking about putting money aside when you are in profit, so you have a safety net for when times get tight? What would be good short and long-term strategies?


A well-planned cash flow budget could alert you to potential shortfalls before they bite into your business. And taking note of some of our tips for keeping the cash flowing will help you avoid reaching this stage.


Next steps: Watch our Foundations of cash flow webinar

This webinar was produced by the Davidson Institute, Westpac's home of free financial education resources, building confidence today for a better financial future.


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Things you should know

1. Westpac’s products are subject to terms, conditions, fees and charges; and certain criteria may apply. Before making a decision, read the disclosure documents for your selected product or service, including the Product Disclosure Statement and T&Cs for Westpac Invoice Finance (available on application) and credit cards, unsecured business overdrafts, business overdrafts and business loans; and consider if the product is right for you.


The information in this article is general in nature (including and tax and finance information) and does not take your objectives, financial situation or needs into account and does not constitute tax or financial advice. Consider its appropriateness to these factors; and we recommend you seek independent professional advice about your specific circumstances before making any decisions.