How to improve cash flow for business

Running a successful business is a marathon and not a sprint, although sometimes it can just feel like a daily battle for survival. Having a long-term strategy is invaluable in keeping focused when times get tough. Planning ahead, rather than existing on a day to day basis can help avoid future problems and particularly helps to manage how to improve cashflow and maximise profit.

Cashflow is so important it is both the fuel that keeps the engine running and also the oil that stops it from seizing up. With this in mind, the all-important advice therefore has to be ‘how to improve cashflow for business’.

How to improve cashflow - start with where you are now

The first step in learning how to improve cashflow for your business is to understand your current cashflow position. It is hard to know how to improve cashflow if you don’t know where you are starting from. The first step is to prepare and maintain a cashflow forecast. A cashflow forecast, showing when money is coming into the business and when money is due out, for at least 6 months ahead will help you identify how much money you need as a buffer, this is your working capital requirement. The cashflow forecast will help identify any possible shortfalls in cashflow coming towards you.

For details on how to produce a cashflow forecast please download our guidance paper, ‘How to deal with a cashflow emergency’.

How to improve cashflow with a long-term strategy

Once you have identified your working capital requirement and identified any foreseeable cashflow problems, you can now take steps to plug any anticipated shortfall. Introducing more money, from personal resources, or by arranging more business finance may be the answer, but may not be a long term solution. It may be that you

need to analyse your business model to see if you can change the way you operate to ensure a solid future for your business. Not relying on bad paying customers, becoming better at credit control, improving credit terms with suppliers are examples of the type of steps that you may have to implement.

Improve Cashflow

Sometimes it is not possible to have anticipated a cashflow problem, a bad debt, a broken down machine, the loss of a major order or customer can all quickly impact cashflow causing an immediate problem. So if your business engine is running low on fuel or the oil gauge is dangerously low, what can be done to overt a catastrophe and are there any services or products available to help improve your cashflow?

A line of credit designed for emergencies

In an emergency, obtaining a quick business loan can be difficult. This may be necessary to cover instances such as the replacement of failing equipment or vehicles, covering the cost of salaries while waiting for payment from a significant client, or to purchase new stock, etc. Banks typically take several weeks to consider a funding request and anyway borrowing is certainly not as easy as it was several years ago. However in recognition of this situation, Cashsolv is now able to provide an emergency loan of up to £250,000 within 24 hours, and which can help you get past a tight spot and ensure your business does not fall into further unnecessary distress. We are able to do this as we have access to our own funds which we can utilise at our discretion, so we are able to make our own decisions without reference to a committee or through any formal procedure.

If you require an emergency loan, it is important when the dust has settled not to overlook reviewing the underlying reason for needing this credit and take any remedial action that may avoid a recurrence. Go to the emergency loan section of our website and our emergency loans calculator to find out exactly how a short-term loan can improve your cashflow within 24hrs. If required our advisors also have the expertise to analyse your business model and can provide advice to ensure future business success as well as providing immediate cash lending.

Utilise extended payment plans

If you are agreeing instalment plans and juggling numerous creditors, a debt management plan can improve your cashflow through reduced regular payments whilst also placating those creditors chasing payment. You can try to negotiate payments that coincide with the completion of significant orders, and identify significant creditors to ensure payments to these individuals are a priority. It may be possible to pay for large service contracts over the life of the contract, or if you operate a seasonal business you may be able to spread payments and negotiate a couple of “skip payments” on the quieter months.

Sometimes your business will not have the manpower or expertise to deal with such negotiations, and in many cases it is wise to involve a third party who can help smooth the relationship. Cashsolv offer a creditor payment plan that is confidential and can work on your behalf to mediate such terms. Our experience and strong connections with HMRC also mean that we are able to offer Time to Pay Agreements in negotiation with HMRC. Staggering some of your payments over time can offer an ideal solution in how to improve your cashflow when times are tough.

Have a collection process in place

It is a fact that many businesses, particularly smaller businesses are owed £10k’s in overdue unpaid invoices and also regularly suffer problems with delaying invoicing or failing to even invoice at all! When juggling all the demands of running a small business, even something as crucial as getting paid can be a problem. The majority of invoicing is still done via paper and post, which is typically inefficient, so investing in a more seamless and automated system may help. There are several computer packages designed to make the process easier, so time invested in carrying out some research or getting advice from your accountant may pay off in a relatively short period.

It is a fundamental requirement of any business to eliminate any delays in invoicing and to adopt strict payment terms with your customers. Knowing the timing of your customer’s payment run and trying to invoice in-line with this schedule can go a long way to ensuring the likelihood of receiving payment on time. You can also build into your cost structure, discounts for early payment and conversely introducing penalty terms for late payment. This is partly about training your customers from the outset to encourage compliance with your terms. If you are working on large projects or receiving large orders, don’t forget the cashflow implications when negotiating terms. Many a business has ended up insolvent as a result of the excitement of a significant sale, resulting in a blind spot as regards the cashflow risks. It is always wise to consider requesting progress payments to ensure a consistent flow of income to improve your cashflow and also reduce your exposure to a bad debt.

If you have reached a point where poor payment from customers is causing a cashflow problem, it is much better to act sooner rather than later. The longer it is left the harder it becomes to get paid. Cashsolv offer intelligent debt collection services. We can work confidentially, sensitively and closely with you to you help you get paid whilst protecting your customer relationships, so that you can continue to trade with each other if you wish. In most cases commercial debt recovery can actually improve customer relationships by managing expectations and bringing order to an otherwise contentious situation.

Maintaining positive cashflow is crucial to the success of your business. Cashsolv™ services are all about helping businesses resolve cashflow problems in a way that causes the minimum of disruption to the business and will give the best chance of success in the future. If you are wondering how to improve cashflow for your business our experts are on hand to offer advice and solutions to your problems. Contact us now for a confidential assessment or arrange a discreet call back request.

For further information Download our Guidance Paper on 'How to deal with a cash flow emergency’, or view the following relevant pages:

By Carl Faulds

| 27th February 2014

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