We cannot stress this enough; stable cash flow plays a vital part in the success of your business. Poor cash flow may mean that you can’t pay your suppliers, this can damage your reputation and your relationships. A poor cash flow can hamper your business’s ability to grow and potentially means that you will have to turn away big contracts as you can’t afford the overheads.
Forecasting plays a big part in getting your prepared. Set targets for the next six to twelve months, this will help you to plan ahead for big expenses or quieter months. A forecast should monitor monthly income and expenditure, remember to account for seasonal changes for example, in winter your heating costs will most likely be higher. Be realistic; there are no prizes for excluding some of your expenses. Include every single expense and every bit of income you receive, no matter how small.
An additional benefit or a cash flow forecasts is that you can analyse your expenses all at once. With all of your outgoings written down together, you can eliminate unnecessary costs and try to negotiate more favourable deals and payment terms with your suppliers. Initially, it may seem time-consuming, but you will feel the benefit.
Stock management is a delicate balance. Not enough stock and you won’t be able to keep up with demand, but a surplus of stock means that you have cash tied-up in products that are just sat in the warehouse. Regularly monitor your stock levels, re-stock on items that are selling and review which items you have left. Regularly reviewing your stock levels can positively impact on your cash flow.
There will be a time where you need the help of a bank or lender, whether you’re starting out, going through a rough patch or looking to expand. You should think of your bank/lender as another supplier; you should maintain a healthy relationship with them just as you would with any other supplier. Inform them of any changes in your forecasts or unforeseen expenses. Building a genuine relationship with lenders will work in your favour when applying for an overdraft or short-term loan.
Without any money coming in, it’s obvious that your cash flow will falter. Invoice your clients promptly and chase-up late payments as soon as you realise that they’re overdue. Define your payment terms with your client and ensure that they are aware of the penalties for late payments. Credit reporting can help to prevent you trading with irresponsible payers. A credit report provides you with a client’s payment history and financial situation, if they have been issued with CCJ’s or filed for bankruptcy, then it may indicate that they struggle to make payments on-time.
While there are certain things that you can do to stabilise your cash flow, sometimes it is the clients that cause the problems. A third-party agency, like Commercial Domestic Investigations can help you. From credit reporting to collecting debt from late payers our expert team will work tirelessly to recover any debt owed to you. Contact our team on 08444 159200, use our contact form or email firstname.lastname@example.org.