Cash flow is the lifeblood of any business and if a position is reached whereby outgoings exceed income a business can quickly become insolvent.
Ways to improve the cash flow position of your business include:
Invoicing on time
Late or missed invoicing can have a detrimental impact on cash-flow and the ability to adhere to budget plans. A focussed and timely approach to invoicing is a key area to improved cash flow.
Overtrading is when a business takes on more customers/contracts than it can comfortably accommodate. As a result insufficient funds and resources can have an adverse impact on a sustainable business model.
Debt recovery is necessary for the majority of businesses. An active policy on recovery in line with invoice payment dates and on-going dialogue with debtors is vital to maintaining cash flow.
Keeping control of stock levels ensuring capital is not tied up unduly in excess stock will improve cash flow and potentially reduce storage requirements with resultant savings in storage charges.
Periodic re-negotiation of credit terms with suppliers can have a positive effect on cash-flow and ensure trading occurs on the best available terms.
Factoring is a way to access cash that is tied up in unpaid invoices. It is possible to release up to 95% of money owing and it can be accessed in as little as 24 hours. A factoring company will handle the both the sales ledger credit control and collection with resultant cost savings.
The sale of underutilised assets can be a solution if the business is able to lease back under more profitable terms with a resultant increase in working capital.
Extending lending facilities
Depending on your circumstances you may be able to negotiate an extension or increase in your lending facilities. This can, however, lead your lender to undertake a review of all facilities with a subsequent overall reduction and the risks associated with such an action. In this regard a review by an independent advisor is probably the favoured approach.