Company Cash Flow Problems: Top tips for dealing

Good cashflow control  is important for any business. For a growing business, it is absolutely crucial, since financial problems can limit or stop the growth of your business. Overtrading can similarly cause grave issues. Making the best use of your finances should be a key part of business planning and assessing new opportunities. You may need to pass up certain opportunities if pursuing them would take essential funding away from your core business.

01. Audit your business finances: Carry out a review of all outgoings and incoming revenue to see where savings or improvements can be made. A straightforward strategy of upselling complementary products or services alongside your main offering could have a significant effect on turnover.

02. Improve profit margins: Raising prices may not ordinarily be your action of choice, but carrying out an audit of your finances could reveal some room for manoeuvre. Negotiating better deals with suppliers will also help to improve profit margins.

03. Cut costs: Streamlining costs by regularly moving to the best tariffs and deals may seem simplistic, but significant savings can be made in this way. Providers will not want to lose your business, and the threat alone could be enough for them to offer a better deal that allows you to save money on a monthly basis.

04. Prioritise credit control: As a director, you need to know how much money is owed to the company at any given time. Prioritising the collection of monies owed will help to maintain a positive flow of cash through the business. This can be achieved by setting up a computerised system providing notification when a payment is late, and reducing the overall collection period.

05. Cash flow forecasts: The regular use of cash flow forecasts lets you know how much cash is going to be needed in the coming months. One-off requirements for cash that might otherwise derail a stable company can be recorded, allowing you to make arrangements for extra borrowing, or take other appropriate action. Cash flow forecasts are a very useful, but often underused tool, which forewarn company directors of potential trouble ahead. They need to be updated regularly, however, with the actual figures being compared to those forecast.

06. An organised accounting system: It is a legal requirement for companies in the UK to keep full and proper financial records, otherwise you may face accusations of unfit conduct as a company director. Computerised accounts that are accurate and up to date are vital to stay in control of cash flow – management reports that provide a daily update on your cash position could help you avoid a steady decline into insolvency.

07. Consider alternative funding options: A good example is factoring. This method of financing releases a cash lump sum back into the business, and can quickly improve your overall cash position. An additional benefit is that as your sales increase, so does your line of credit. The factoring company takes control of your sales ledger, making around 85% of the value of each invoice available to you immediately, with the remaining balance being paid once they have collected the money from your customer. You pay fees and charges to the factor for this facility. Escrow such as those offered by can prove a cheaper, quicker and safer option.

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