One of the commonest reasons that businesses fail is because they’ve run into a cash flow crisis.
A steady stream of incoming cash is usually a sign of a healthy, thriving business. Cash flow is not only important to the day-to-day running of your business, it is also essential for growing your empire.
Protect your business from these 5 common threats to cash flow to avoid running into problems.
Relying on one or two big customers– If your business relies too heavily on one or two big customers it puts your cash flow in a very precarious position. Having more customers of lower value, rather than one or two very high value customers means that losing a customer won’t hit you as hard.
Customers paying invoices late – Having an organised and efficient collections process in place is key to good cash flow. It doesn’t matter how high your sales figures are, if you’re struggling to collect payments on time then it could have serious consequences on your cash flow.
Low sales or high spending with suppliers– Keeping a healthy balance between your sales figures and the amount you’re spending with suppliers is very important. Always negotiate prices and payment terms with suppliers to ensure that you aren’t paying over the odds, if your supplier debts are very high and you suffer a dip in sales you could find your business struggling with cash flow.
Seasonal changes– Always remember to factor into your forecasts the potential for seasonal changes in sales. Proactively plan and prepare for seasonal dips to protect your cash flow during these periods.
Unexpected events or changes– The most successful and robust businesses are usually those that perform comprehensive contingency planning. Unexpected events like loss of a key customer, an economic downturn, or a disaster like a fire or flood, can be devasting for businesses that haven’t prepared for the worst. Always having a plan and a buffer in your cash reserve can offer you some security and direction if things go wrong.
If your business has run into cash flow problems call our free helpline on 0845 273 4000 for more information about our company rescue services.