How to Improve Business Cash Flow

For any business cash is an important factor in business survival. Without it you cannot pay wages or suppliers. Many businesses focus on profits without paying too much attention to actual cash flow and this can end with business failure even for profitable businesses.

At Funding Solutions we specialise in cash flow finance but let’s take a look at what your business can do to improve cash flow:

Prepare a cash flow forecast – as already mentioned many businesses focus on profits at the expense of cash flow. A cash flow forecast will show when invoices are realistically expected to be paid both by your business and by your customers. As such it shows cash inflows and outflows. It will show whether the business will have a cash surplus or cash deficit each month. As such it will allow you to plan and take action before it is too late. At Funding Solutions we offer a free cash flow template and we also offer to prepare a cash flow statement on your behalf.

Obtain better terms from your suppliers – can you get longer credit terms from your existing supplier or an alternative supplier. It may even be worth incurring higher costs and reducing profitability if your situation requires it. Many businesses issue invoices with 30 day terms on them as standard but in reality only expect payment after say 45 days. As such if you are always paying on time it might be worth delaying payment by a week or two. The slower cash leaves your business the better your cash flow will be.

Collect cash in quicker from customers – if you are offering your customers credit terms is it possible to effectively reduce those terms from 30 days to say 14 days without upsetting them? Can you do your credit control more effectively to ensure that your customers pay on time? By speeding up the payment of invoices your cash flow will improve. An ideal situation is if your credit terms with suppliers are longer than the credit terms offered to customers. If your customers pay on 30 days and you are on 60 day terms with your suppliers then your cash flow could be quite healthy.

Manage stock better – the more stock your business carries the more cash you have tied up. You obviously have to carry enough stock to service your customers effectively but you do need to ask a few questions. Can I carry less stock? Can I order more efficiently? Do alternative suppliers have better solutions or delivery options? BY reducing your stock levels or improving stock turn your cash flow will improve.

Arrange suitable finance facilities – some businesses are naturally cash negative  and there is very little they can do to improve that. A good example of this would be a typical temporary recruitment agency or cleaning company. They will send out staff on a weekly basis and those staff are typically paid weekly. That means there is a cash outflow each week. The business will typically invoice the customers monthly and usually on 30 day terms. As such even if the customer pays the invoice on time the business may have had to make 8 weekly wage payments. These type of businesses will typically use invoice discounting or invoice factoring to assist with cash flow. Manufacturing or engineering businesses may have cash tied up in plant and machinery that is fully paid for. As such an asset refinance exercise might be a suitable option to release cash back into the business.

How can Funding Solutions help?

At Funding Solutions we have a wealth of experience in working with businesses and advising them on their cash flow. We can help with the following:

  • We are happy to supply you with a free cash flow forecast template to assist you with your own planning and business analysis. This should be your first port of call if you do not have a cash flow forecast.
  • As part of our business services we have experienced consultants that range from accountants to ex bank managers that can work with you on competitive day rates to prepare a cash flow forecast for you. If required they can also provide training so that you can update the cash flow forecast on a weekly or monthly basis.
  • At Funding Solutions we are also happy to speak to any business owner on the phone to assist with advice and explain what options are available to them.
  • Our speciality and area of expertise is cash flow finance and as such we can help your business source and structure suitable finance. This may be factoring, invoice discounting and asset refinance or it may be a more specialized solution such as recruitment finance or import finance. By talking with us and allowing us to understand your business we can explain what options might work and what facilities will be available to you.

If you have any questions about your business cash flow please contact one of our team on 0845 251 4040.


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