9. Put the right finance options and funding liquidity in place
If your business is seasonal or your cash flow is unsteady – for example, if you do most of your business around Christmas – you'll need to think about the best options for financing.
If you need fast access to cash from your customers, you can sell the debt to an invoice factoring company, who will then pay you 90% of the invoice value immediately. Once the customer has settled the invoice, the factoring company will pay you the remaining 10% less their fee.
You could choose to renegotiate your overdraft facility with your bank if you can see that your cash needs are short-term but if your forecast suggests a longer-term challenge, you could look at more structured forms of financing such as bank loans. Alternatively, trade loans or working capital loans may be available for companies that have significant trade flows. Trade loans are used to bridge the gap between the purchase of product and payment from the end customer.
By keeping a close eye on your cash flow, you can plan for potential shortfall periods and get better deals. If you unexpectedly run short of cash, it can be stressful and end up costing you a lot more to rectify.
Make better use of any surplus cash by putting it into interest-earning accounts to generate extra income. It's better than leaving a high balance in a non-interest-paying current account. Talk to your bank to find the best option available.
Managing your cash flow is a vital element of running a sustainable business. When the economic situation is fluctuating, leading to uncertainty and volatility in prices, all businesses, whether long-established or just starting out can benefit from advice, funding and support.
Creating an environmentally-friendly business can help the planet and also cut costs. Find out more about Green Finance from our specialist ESG and sustainability team.
So, what are the 5 principles of cash flow management? Accelerate cash inflows through active accounts receivable management, timely invoicing and sending out payment reminders, offering discounts for early payment, and enforcing strict credit policies.
So, what are the 5 principles of cash flow management? Accelerate cash inflows through active accounts receivable management, timely invoicing and sending out payment reminders, offering discounts for early payment, and enforcing strict credit policies.
Offer staged monthly or quarterly payments rather than paying at the end of a contract. Set aside disputed debts with suppliers but keep current payments up to date. You could also negotiate payment terms with other creditors such as HMRC and finance companies if you have a short-term need to improve cash flow.
There are three cash flow types that companies should track and analyze to determine the liquidity and solvency of the business: cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. All three are included on a company's cash flow statement.
By closely monitoring key cash flow data or variables, you'll be able to make better, more accurate, more up-to-date projections of future cash flow and you'll be more likely to keep your business out of trouble financially. Prepare a thorough, accurate cash flow forecast.
One highly effective strategy to improve cash flow is by offering enticing discounts for early payment. By incentivizing customers to settle their bills ahead of schedule, businesses can significantly accelerate the inflow of cash, enhancing liquidity and financial stability.
Receivables increase cash flow, while accounts payable decrease cash flow. A company could artificially inflate its cash flow by accelerating the recognition of funds coming in and delay the recognition of funds leaving until the next period. This is similar to delaying the recognition of written checks.
Transactions that show a decrease in assets result in an increase in cash flow. Transactions that show an increase in liabilities result in an increase in cash flow. Transactions that show a decrease in liabilities result in a decrease in cash flow.
There are a number of ways that a business can improve their cash flow, these include: increase revenue – a business can try to sell more products. reduce costs – a business may negotiate better deals with suppliers or cut back on non-essential spending.
Introduction: My name is Velia Krajcik, I am a handsome, clean, lucky, gleaming, magnificent, proud, glorious person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
