Cashflow is the lifeblood of a business and it needs to stay in the black. In other words, your business must have a positive cashflow.
If you don’t, it means you don’t have enough cash circulating through your business and could struggle paying for day-to-day business costs.
A lot of businesses experience temporary fluctuations in cashflow, but unexpected bills and emergency expenditure can quickly turn things from bad to worse.
As soon as this happens, a lot of people press the emergency brakes too early and liquidate their business.
You don’t need to panic, though. First, try getting back on track with our advice.
Simple cashflow improvements
You can make some simple but effective changes to the way you run your business to improve your business’s cashflow.
For instance, you could send out invoices as soon as possible to give your clients the best chance of paying you on time. If you’re prompt, or even early, maybe your clients will be, too.
Make sure your invoices are clearly laid out so you don’t give people excuses to say they didn’t know what you were invoicing them for, or query when payment was due or how you wanted them to pay.
If you still don’t get prompt payments after this, you know the problem isn’t on your end, in which case consider applying penalties for late payments and discounts for early ones to keep cash coming into your business.
Cloud accounting software can also improve your cashflow situation, with many providers having the facility to send out automated invoices and reminders to enable clients to pay on time.
If you buy from suppliers, a simple solution is buying in bulk – a lot of suppliers will offer you a better deal to entice buyers because they, just like you, want a positive cashflow.
And just like your supplier, you can also set up a smart pricing strategy. You might think higher prices would help out during a crunch, but that could just put off potential customers. Lower prices, discounts and deals, meanwhile could help you shift some of the stock that’s tying up your cash.
If you have no choice but to raise prices, though, make sure you communicate this effectively to your customers so they’ll be more accepting of the change.
Sometimes, you can’t fix negative cashflow issues with a few changes here and there. Sometimes, it takes something radical, such as refinancing, which means taking out a debt with an asset or piece of property being used as security.
Asset refinancing is one of the simplest financial solutions, using a business’s existing assets to raise cash.
You do not need to own the asset outright, as refinancing solutions can also be used on equity tied up in the company property. So, depending on your requirements, you could refinance single or multiple assets.
Generally, funding providers can offer refinancing arrangements between £5,000 and £5 million, depending on the value of the asset(s).
But perhaps you’ve already tried to fix your cashflow issues once before, and this time, you really don’t see how you’re going to get out of this one.
In that case, consider voluntary liquidation, although we urge business owners to get advice from us before you go ahead with it.
Available to limited company owners, voluntary liquidation allows an appointed insolvency practitioner to wind up the company and sell its assets.
It’s a legitimate path to go down if you just don’t want to run the business anymore, but again, it shouldn’t be your first choice for cashflow issues.
If nothing else has worked out for you, the best thing you can do before opting for the ‘nuclear’ option is to seek out an accountant for help.
If you have cashflow worries, don’t hesitate to get in touch with us.