Fact; all businesses need cash flow to operate.
Regardless of the economic climate or the legitimacy of your business idea or concept, it is impossible to succeed without establishing a model that optimises the level of working capital available within your venture. Interestingly, business confidence often has a direct link to the levels of cash flow boasted by companies, which suggests that many are succeeding in this respect in the current economic climate.
A reduction in cash flow can occur for a number of reasons, such as high expenditure, increased staff wages, or a drop in sales. However, cash flow problems can also occur when sales have risen, meaning in theory, your business profits should have grown, too.
If your business is currently in a difficult cash flow situation, here are five solutions to explore: –
Review Outgoings and Expenses
As mentioned, spending too much on your outgoings can result in cash flow problems, especially if the ratio is not proportional to your income. As such, evaluating your expenses could help to solve cash flow issues. You could review inventory before ordering additional stock, reconsider before purchasing new equipment and think about ways you can cut down on energy bills.
Get Instant Invoice Payments
Clients not paying on time, or else waiting for a thirty day period for invoices to be paid, can leave your business struggling to find available cash. Rather than holding out, use your unpaid invoices as an asset, by using a factoring company to loan the amount owed before your client pays for goods or services, immediately releasing needed cash.
Consider Credit and Capital
If you find your business in a difficult cash flow situation, one of the most obvious solutions is sourcing additional funds. You can do so by adding an overdraft on your business count or applying for a business credit card. Before doing so, it may be a good idea to assess working capital through a firm like Marketinvoice Limited, to assess company assets and ability to meet financial commitments.
Negotiate with Suppliers
Suppliers can make a huge difference to your business cash flow, both in terms of pricing and payment. You could discuss deals with suppliers for buying in bulk, or as a loyal customer try to negotiate a discount on prices. In addition, your could consider trade credit, which essentially allows you to buy from suppliers and pay at a later date, a common business finance tool.
Prevent Problems with Forecast Business Cash Flow
Finally, while it may not help you to get out of your current financial dilemma, forecasting could help to prevent your business from running into the same issues. When creating a cash flow forecast, aim to cover an entire year and include all outgoings, allowing for seasonal fluctuations whereby sales may rise or fall, or expenditure may increase, helping you to plan for difficult times.