Before we start, let’s clarify what exactly cash flow means – this refers to money going in (sales and investments) and out (bills, expenses and payroll) of a business. Cash flow is important to day-to-day operations, so it can be extremely stressful when cash flow problems occur.
There are several factors that can affect access to available capital such as supplier price increases, product demand, investing in the wrong area or too much stock. Cash flow projections and budgets can help you resolve these problems, but in the meantime, we’ve pulled together 7 ways you can improve your short-term cash flow problems now.
- Lease don’t buy what you need
Buying equipment outright can be a costly option. If you don’t have the funds but need a piece of IT equipment or machinery quickly, hiring or leasing allows you to maintain business as usual whilst you continue to develop other areas.
There are plenty of leasing options to suit your circumstances, if you’re unsure where to start, a broker like Busby Finance can assist you. Certain Lease products are classed as operating expenses which allows you to offset a percentage of the cost against your corporation tax bill to reduce your liability. This makes leasing one of the most tax efficient ways of acquiring new equipment
- Refinance your assets
If you have existing valuable assets such as additional premises or high-ticketed machinery, you can free up some cash against the price of that asset. It doesn’t matter if you already have finance on it or own it outright, asset refinance can still be applied whilst you continue to use it.
- Speak with your suppliers
You probably have suppliers whom you’ve worked with for a long period, establishing good relationships. Talk to them about renegotiating your current prices and flexible payment options – perhaps they could discount larger orders or look at payment extensions. Don’t hesitate to shop around too, if you can find a better deal that’ll release some capital you can always switch.
- Improve your inventory
By keeping up to date with your inventory, including your stock, equipment and staff, you’ll have a better understanding of how your business is functioning. Track your stock levels and analyse what’s selling and what isn’t; is the latter worth keeping, or can you sell off at a discounted price to make room for more of what your customers want?
- Remember to send your invoices
Get into the habit of sending invoices as soon as a service is completed, or a product has been sent. Not only does this give your customer plenty of time to pay but you won’t be sending last-minute invoices at the end of the month.
Make sure your invoices are clear too, highlighting the amount and due date. Include any late fees that will be charged and set aside some time to check it’s been paid on the set date. If it hasn’t, follow them up straight away.
- Look at your profit margins
If a company is moving comfortably, this is an area that can often be overlooked. Start by reviewing your processes: spotting ways you can reduce costs, streamline processes or bulk buy products. Review your prices too; small price increases are unlikely to put off customers but can make a big difference to your immediate cash flow.
- Speak to Busby Finance
Our friendly team of experts are on-hand to answer any of your questions. We’ll take the time to get to know you and your business to recommend the best financial approach.
