Small business finance for better cash flow

Funding to start a business

Maintaining cash flow is a big concern for small business finance, as cash is very important when it comes to the financial management of a growing company. Cash flow can become an issue due to the lag time between when you have to pay your suppliers and employees and the time that your collect payments from your customers. If your business runs out of money your business will run into serious problems.

Cash flow management is the solution to this problem, in its very simplest form cash flow management means knowing what your outgoings of cash are and when anyone who owes your money to pay you will pay you and determining whether you need additional cash or not.

Cash flow forecasting

You can prepare cash flow projections for the next year, next quarter or depending on your circumstances even the week ahead. Cash flow projections are important as they can alert you to the potential cash flow troubles ahead.

Cash flow plans are educated guesses based on factors such as, your customer’s payment histories, up and coming expenditure and your vendor’s patience. Cash flow forecasting is an essential management tool, however forecasting will only highlight any potential problems before they happen, so you will need to take extra measures to prevent cash shortfalls which can lead to larger problems like potential business failure.

There are a few simple actions that you can take to help your cash flow:

Improving receivables

If you were paid for the goods and services you provided as soon as you provided them you would never have cash flow problems, however the world of business does not work like this. However you can improve your cash flow by managing your receivables, by following a few simple suggestions:

  • Offering discounts to customers who pay their bills quickly
  • Take deposits at the time customers place their orders
  • Conduct credit checks on new non-cash customers
  • Sell off out dated inventory even at a reduced rate
  • Issue invoices promptly and follow up on payments
  • Identify slow paying customers and issue a cash on delivery policy as an alternative to refusing to do business with them

Managing payables

When you are growing a business, keep a close eye on your expenses, if you see your expenses growing faster than sales examine the costs carefully and then find ways to cut or control them. You could try:

  • Only paying a debt when it is due, if a payment is due in 30 days, don’t pay it in 15 days
  • Use electronic fund transfers, so you can make payments on the day that they are due
  • Communicate with your suppliers regarding your financial situation, if you need to delay a payment, speak to them and renegotiate terms.
  • Consider suppliers offers of discounts for earlier payments, they may provide an opportunity for you to reduce your overall costs
  • Don’t always do business with suppliers who offer the lowest prices, sometimes its better to choose a supplier with more flexible payment terms

Help with cash flow

We have a wealth of experience in dealing with small business finance, and we have worked with many organizations helping them to find the best solutions for better cash flow, so if you need a bit of extra help we can help you too.

There are a variety of solutions available which include:

  • Invoice factoring
  • Bank overdraft
  • Business credit cards
  • Fixed term loans
  • Asset finance
  • Invoice discounting

We will work with you to work out what the best solution is for you, your business and your specific needs.

For further information about business finance please contact our advice team on 0800 597 4757 or apply online using the form opposite.