Unfortunately, this is a question we are being asked more and more lately!
When it comes down to the nitty gritty it does not matter how much profit you make or how well you are doing, because without cashflow, there is no business!
Cash is King!
Cash flow is the financial heartbeat of a small business, and its significance cannot be overstated. It represents the movement of money in and out of the company, encompassing revenue, expenses, and operational costs.
For small businesses, cash provides the flexibility to cover essential expenses, manage unforeseen challenges, and seize opportunities for growth. It allows owners to pay their bills, purchase inventory, meet payroll, and invest in strategic initiatives. Moreover, having a healthy cash flow acts as a safety net during economic downturns or unexpected disruptions, ensuring business continuity.
Without a positive cash flow, a business may struggle to cover its day-to-day operating expenses or endure unexpected setbacks, potentially leading to financial instability or insolvency. In essence, cash flow management is the key to sustainable operations, enabling small businesses to thrive, adapt, and prosper in a dynamic business environment.
How do we approach this in the short-term?
When approached with this question the first question we ask is how much money is your business
owed and how much do you owe?
From here we can structure a quick win plan. Firstly, spend some time ringing round customers who owe money
and at a bare minimum get advised of when the payment can be expected, however ideally an immediate payment
would be far better. This can assist in some planning scenarios, eg. Knowing when cash is coming into the business.
We would then review what is owed and when this is due. For anything that is now due we would reach out to suppliers
and request an extension on the due by date. You will be pleasantly surprised at how accommodating most suppliers will
be! After all it is in their best interest to assist their customers in remaining solvent.
So hopefully this may give some breathing space in the short term.
From here we would then look into some long-term actions, such as:
- Raising finance (either by applying for a loan or selling shares in the business)
- Review what grants the local councils may have available to apply for.
- Is the business eligible to apply for R&D tax credits or similar.
How do we approach this for the longer term?
And from there we would also see if we can renegotiate better terms with suppliers and review credit control processes to see
if there are ways of improving the monies getting paid on time.
If you are struggling to say pay the monthly wages, your first port of call should be your bank. Banks are now very proactive in offering
Businesses an extended overdraft or loan to cover wages. Of course, we know this is not sustainable, but it should at least give another month
to review all the other processes.
Where can I get help with cash flow?
The best advice is always to keep on top of your figures and complete a cash flow forecast at least quarterly so if you can see you will be short of
cash in 2 months let’s say, you will have a bit of time to consider some actions to take.
If any of this resonates with you and your business, please do not hesitate in contacting us to see how we can assist you and your business with cashflow. You can Book a Call with us using the Book a Call button at the top of this page.