Most small businesses will suffer from cash flow issues at one point or another. Effective cash flow management is one of the most important factors in running a successful business. After all, even if your sales are growing, if you have more expenses than income, you may not be able to pay your staff and suppliers, and cash flow may become an issue.
In this blog, we look at some common cash flow solutions for businesses.
Business loans
There are many different providers offering a range of business loans – which one would be most suitable depends on a range of factors. The most common types are
- secured loans – secured against an asset
- unsecured loans – when there are no assets available, although a personal guarantee might be needed
- revolving credit facilities – a type of working capital finance
- business cash advance
Business overdraft facilities
Although it’s become more difficult in recent years to get business overdrafts agreed by the main banks, these can provide a useful buffer when cash is needed quickly.
Sell or refinance assets
If your business holds assets such as stock or machinery, you could either sell redundant items to raise cash, or refinance them through a lender. The latter option would enable a lender to use the asset as a security to raise a loan.
Collect outstanding debts/factoring
Chasing up debtors can be a quick and relatively effortless way to help ease cash flow problems. Also, factoring or invoice discounting is a well-established way of using your debtor book to improve cash flow.
Change invoicing practices
Consider improving your invoicing practices by streamlining internal invoicing processes, incentivising early payments and penalising late payments.
Look at supplier contracts and credit facilities
Re-negotiating supplier contracts and considering alternative options could result in reduced expenditure and improved cash flow. Just because you’ve been with a supplier or lender for a few years doesn’t necessarily mean you’re getting the best deals available so it’s worth looking at competitors.
On a final note, have you considered spreading your professional fees?
As accountants, we understand that paying for professional services can be costly. Rather than having to pay fees in one lump sum, we have a solution to spread the payments over a number of monthly payments through providers such as Premium Credit, offering competitive rates of interest. This solution can be applied to quarterly VAT payments and 6 monthly tax payments too.
We also recommend obtaining fee protection insurance in order to cover the cost of engaging an accountant to defend your position, should you be investigated by HMRC.
The contents of this blog are intended for guidance only; please seek professional advice to identify the best option available for your business. Have a look at our Business Services pages to find out more about how we can assist you.