Running a small business isn’t easy. Poor cashflow is probably the biggest single cause of business failure. It doesn’t matter how much you are owed – if you haven’t got the money to pay your suppliers, staff, bank or HMRC, you won’t survive. By improving cashflow in your business you are on the right road to operating a successful business.
There are steps you can take to avoid getting in the position of being a profitable company on paper – but having no money in the bank. Most are pretty obvious but are often neglected.
Read about 10 things that could help…
1. Ask for payment in advance. If you’ve got the money before you do the work or supply the goods, your cashflow is going to be pretty positive. Just a word of advice on this – make sure you don’t assume it’s all profit and spend it. Put the right amount aside to pay your suppliers, VAT, staff, taxes etc.
2. Clear credit terms. If you have to supply on credit, make sure your terms are clear on when payment is due and that you will start charging interest or penalties if payment isn’t received.
3. Look at offering early settlement discounts. If you want £100 for a job/product, do your invoice at £105 with a £5 discount if paid within 7/14 days. If you don’t get the money quickly you should, at least, get the higher amount. Just make sure you deal with VAT correctly. Get in touch with us to find out more about this.
4. If the money doesn’t arrive on time, don’t be afraid to ring and ask. Be polite and just ask for confirmation of when payment was sent and, if it hasn’t been sent, ask for a reason and when it will be sent.
5. Outsource credit control. Sometimes a business owner feels that asking for payment can upset a relationship with a customer. If this is how you feel, consider outsourcing your credit control function. This is something we can help with so give us a call.
6. Specialist services. We do have contacts with specialists who can pursue debts on your behalf, through the courts if necessary. Hopefully you won’t get to the position of having to do this – but, if you do, we can help.
How can I improve cashflow in my business?
7. Tackle issues early. If you are not being paid on time and are struggling to pay your own debts, don’t just bury your head in the sand. You need to talk to your suppliers and your bank to tell them what is happening. Most businesses will be supportive if they feel you are keeping them informed – but they get really annoyed if you just keep quiet or, even worse, give them promises you won’t be able to keep. If this is the position you are in we may be able to help by negotiating with your creditors to get you time.
8.Consider factoring as a means of improving your cashflow. With factoring you know that you will receive a high proportion of your money as soon as you issue your invoice. Factoring is an important part of many companies’ successful growth. We have specialists available who can talk you through the various factoring services and help you find the right one for you. They aren’t all the same. One word of caution here, we haven’t found that the factoring services offered by the major clearing banks are necessarily the best. Just because your bank offers you the facility, don’t be afraid to say “No” and look at alternatives. Read more about factoring here.
9. Refinancing. If you have equipment or other assets it may be possible to refinance these to help with cashflow. Again, ask us about this.
10. Explore finance options. Having a 50% share of £10 is better than having a 100% share of £1. Selling part of your business might give you the cash to eliminate cashflow problems – and to help your business grow. The best source of finance is often people you know but there are services which put investors in touch with businesses wanting finance.
Cash is the lifeblood of a business. Without it, a business fails. You need to ensure that your business has adequate cash flowing through it. If you want to discuss cashflow issues, don’t hesitate to call us on 01509 816150 or contact us via our website.