Facing business cash flow challenges? 5 tips to help

Whether you’re a well-established, small, or large company, you can be hit with cash flow problems. Whatever the shape and size of your business, cash flow is not something to sweep under the rug, in the hopes that it will right itself.  

Being in tune with your business and understanding in-flows and out-flows of cash is imperative to staying afloat in business today. It’s been a turbulent couple of years with a global pandemic and the rising cost of energy prices, now is a good time to deep dive into existing and potential cash flow challenges for your business and identify where you can make positive steps in safeguarding your business. 

That’s why we have put together 5 helpful tips on how you could help manage your business cash flow, including planning, improving vendor relationships, and some business finance tips. Hopefully, this quick guide can help you take the steps needed to get your business cash flow on track in 2023. 

Why is it important to keep on top of your business cash flow? 

It seems like a simple question, but with all your time and focus spent on running your business, keeping ahead of the competition, and growing and acquiring new assets, it leaves little time to delve into the incomings and outgoings of cash. The bottom line is that cash is important because it enables you to meet your existing financial obligations as well as planning for the future. 

Balancing your in-flows and out-flows of cash ensures a smooth day-to-day running of your business as well as being able to build reserves for future peaks and troughs and be able to grow when the time is right. To calculate your cash flow, total all cash received minus the total amount spent over a given period- Net cash in-flows – total cash out-flows = Net cash flow

1. Forecast your incomings and outgoings

A business cash flow forecast estimates the cash position of your business in the future, including projected net income, expected costs and expenses and estimated outgoings. Forecasting can positively affect your business cash flow as it is able to reveal where you need to cut expenses or gain extra sales to maintain a positive cash flow. You will be able to pinpoint occurrences that negatively affect cash flow such as late invoice payments and be able to adapt to emergencies like replacing equipment much easier. 

2.Consider increasing your prices

Although a scary concept, increasing your prices can not only positively impact the incomings of your business, but it is also a good way to experiment with how much your customers are willing to pay. Try increasing the price on your best sellers first and see how your customers receive this, it may be that you lose customers but until you try there is no way of hitting the perfect number. It may also be a good idea to reduce or remove unprofitable or low-profit products or services you offer and instead focus on those that are better selling or have a higher profit. 

3.Invest time and energy into your invoicing 

It’s a discouraging realisation many business owners come to understand that getting paid late for their products and services is a regular occurrence. Those clients may be trying to even out their cash flow, but it may leave you trying to make up for lost revenue while waiting to get paid each month, which will negatively impact your business cash flow. Send out invoices as soon as possible and regularly follow up with reminders to pay. You could also try offering discounts to customers for early payments or offer fees for those that are late.  

4.Improve vendor relationships

Contrary to the last tip, it is worth investing time into improving and strengthening relationships with your vendors because if you are experiencing negative cash flow then you may need the option of paying later than normal. Being able to negotiate with vendors can make a big difference to cash flow for any business and could just be the saver of an overly stretched cash flow. If your relationship is long-standing and you have a good reputation among your vendors, you may be able to extend your invoice due date by an extra 15-30 days. 

5.Consider business finance for growth

Whilst it may seem counterintuitive to enter into debt when you are trying to balance your business cash flow, obtaining a form of business finance that is suited to your business needs could be the catalyst to positive cash flow and business growth. To be able to stay ahead of the competition and purchase new equipment or expand your premises, a lot of cash is needed upfront which isn’t an option for most. The following types of business finance could be the perfect solution whilst maintaining your cash flow goals- 

  • Asset Finance – enables you to purchase new equipment, enabling your business to grow without having to pay upfront. You can purchase the asset needed to push your business forward and pay for it in smaller, affordable payments over time, allowing businesses to retain their cash. 
  • Merchant Cash Advance – this allows you to spend money where it’s needed, such as operating costs, marketing or even to ensure you can make payroll that month. Only used by a business that takes card payments through a PDQ machine, it ensures your business can operate efficiently and continue to grow by taking a percentage of its customer’s card payments, allowing repayment to stay in line with sales and helping to manage cash flow. 
  • Invoice Finance – an excellent solution to gaining access to the cash you are owed faster; invoice finance works by bridging the gap between the point at which you make a sale and the time it takes to receive payment. Instead of waiting for the usual payment terms, invoice finance ensures that you receive most of the money immediately, helping to maintain a healthy business cash flow 

Talk to specialist business finance brokers, PMD. 

 At PMD, we understand the importance of maintaining a steady cash flow to keep business moving and we are able to offer a range of business finance options to suit your specific needs.   

We are the largest independent finance broker in the UK and work with over 150 lenders to enable us to offer tailored support that ensures cash flow is optimised and you are never held back by your finances.  

Talking to specialist business finance brokers like PMD can help you to identify where the pressure points for your business lie and help to face cash flow challenges head-on, increasing the chance of your business growth this year. 

If you would like to speak with one of our team and get on top of your cash flow this year, then reach out to one of our friendly advisors today and see how PMD can help you.

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