Cash Flow is Tight?

If you are in a situation where you lack the cash to pay your bills, then this doesn’t means that you have failed as a businessperson. In fact you’re a normal entrepreneur who can’t perfectly predict your future. You are one among many others, across different sizes and sectors.

The key to managing cash shortfall is to become aware of the problem as early and as accurately as possible. There are normal, everyday business practices which can be applied to resolve this situation. Some of the ways by which we can help overcome your cash flow problems are:-

Prepare and keep updating cash flow projection for next 1 year

Preparing a cash flow projection is absolutely vital. It should be opened to check everyday’s status similar to how you open and check your e-mails. Even more important is updating it as and when you come to know about the certainity of amount of an item of inflow or outflow. Special attention should be paid to things like seasonal cash fluctuations based on historic data of previous years.

Doing an honest assessment of your forthcoming income

When doing sales forecast, it’s better to be cautious than optimistic because then you’ll avoid nasty surprises. Factors we consider for doing your sales forecast are the market knowledge, the level of pricing, the level of competition, the state of the economy, any special event going to occur, comparison of similar forecast vs actual numbers last year and so on.

Cut down your expenses

If your cashflow is tight, we advice you to cut every expense which doesn’t contributes towards the growth of your business such as decoration, gifts for example some wall paintings may look nice but they won’t grow your business. Also find cheaper suppliers for regular expenses like utilities, I.T. and insurance. Any major expenditure on buying assets should also be avoided as it can result in significant cash payment as deposit.

Set up priority of payments

You need to be very clear about the priority of payments going out every month/quarter. An expenditure or payment if can be deferred to some point in future, should be done so.

How to deal with suppliers

• Rather than making 1 big payment every month, pay it in small amounts every week/every 2 weeks.
• If the amount outstanding is a lot, then set regular direct debit payments.
• Keep suppliers in loop about your cash flow situation, you’ll need their trust and understanding. Suppliers are normally, more interested in keeping you going than a banker.
• Regular suppliers normally relax payment terms over a long time if they know they will eventually get paid.

How to handle HMRC debt

HMRC normally agrees to settle the debt owed to them in affordable instalments without charging much interest or without charging any interest at all. It is not in their interest if your business goes down without paying them.

How to handle customers

• There should be no delay in issuing invoices to customers as and when an agreed level of work has been completed.
• Try and set up standing order/direct debits with customers.
• Offer incentive for early payment.
• Get rid of old, outdated balances for whatever you can get.
• Chase invoices from customers regularly until they pay.

External funding options

The best source of funding the temporary cash shortfall is setting up overdraft facility with the bank. Other options are invoice discounting, small term loans. We can certainly help you with these options.

Act quickly on any warning signs

Don’t build lot of debt owed to you. If there is any customer who has not paid by his due date should be chased vigorously.

Ideally, tight cash flow situation should be no more than a traffic jam on motorway. It should only be a temporary phenomenon. If it continues for a long term, it casts a shadow on the profitability of the business. You cannot continue a business for long, if it is not profitable.

To find out, how we can support your business, why not contact us on 0208 914 8887 for a Free, No Obligation Consultation. Success of your business is our business.