Cash flow is simply the net change in a company’s cash position from one period to the next. So, can something that sounds so mundane really mean the difference between the success or failure of your business?
Positive cash flow
Positive cash flow can be the catalyst for growth of your business. It can give you the capacity to invest in your business, be that in machinery, bricks and mortar, research, technology or training. It also affords you the flexibility to respond to critical business decisions without being restricted by financial considerations.
Whilst having the ability to grow and develop their business is desired by all business owners, good cash flow plays a more important, essential function necessary to all businesses. Having the required amount of cash available to meet your business’ requirements at any given time means having the ability to settle liabilities as and when they fall due. It enables you to service the monthly wage bill, pay tax liabilities when due and settle supplier accounts within credit terms, ensuring future supply.
If positive cash flow performs such an essential function, it follows that poor cash flow must hamper trading. Good preparation of cash flow forecasts and regular analysis of you current financial position will aid the prevention of cash flow problems. In some instances, however, there may be factors out of your control which affect your cash position.
Cash flow beyond your control
For example, you are a manufacturer of product which you supply to a distributor who in turn supplies the product to a retailer in a number of outlets. In difficult trading conditions, the end customer has become savvier, and more reluctant to make an immediate purchase, if they even make a purchase at all. As a result the retailer is late in paying the distributor. They, in turn, seek extended payment terms from you in order to assist their own cash flow. Suddenly, your usually strict 30 days terms of credit are being extended to 45 days or even 60 days. You will be paid, eventually, but later than you were expecting.
In the meantime, you still have wages, suppliers and rent to pay. You may be fortunate and have significant cash reserves or a credit facility, which can be called upon to fund the shortfall in cash income. But what happens if you end up in a scenario where you have depleted your cash reserves, exhausted existing lines of credit and you are out of money? What then?
Cash flow solutions
Running out of cash when you have a viable, profitable business should not mean the end of your business. Cashsolv offers a range of business finance and cash flow solutions to deal with short-term cash flow problems.
We can provide emergency short term business loans within 24 hours, agree Creditor CashPlans and negotiate Time to Pay schemes with HMRC on your behalf. Each of these services have been designed to help business owners facing temporary, short term cash flow problems, to assist them in helping their business to survive and move forward.
If you find that your business is suffering cash flow problems, contact us now and see how we can help.
For further information Download our Guidance Paper on 'How to deal with a cash flow emergency’, or view the following relevant pages: