At this current moment in time, the old adage “Sales is vanity, profit is sanity but cash is king” is probably more appropriate now than at any other time. Directors of SME’s throughout the UK really need to focus on the visibility of their cash position. Businesses don’t go bust because they make losses, they go bust because they run out of cash and so it is essential that directors keep their eyes firmly on their cashflow.
Now the economy is finally starting to show signs of improvements, it is time to really get a handle on your firm's cashflow to ensure it is in tiptop condition to take advantage of better trading conditions in the years ahead. The following are key areas of focus:
Planning time
Management need to take a step back and have an in-depth look at their business:
- Review cashflow projections regularly to see where future issues and cash pressures may lay ahead
- Ensure the business has enough cash to fulfill orders and pay your way
- Where can you juggle priorities to gain some headroom?
- Remember, if you fail to plan, then you are potentially planning to fail!
Managing key relationships
Time needs to be set aside to manage key stakeholder relationships:
Customers
- Evoke a partnership approach with each so you have a shared goal of mutual success
- Ensure your key customers pay on time and appreciate the service levels you provide in return
- If you need some urgent cash to order product, why not offer an early payment discount?
Suppliers
- If your major supplier is looking to increase prices, ask for extended terms. If you don’t ask, you'll never know!
- Keep them informed of future requirements and credit limits needed to fulfill orders
- Let them know how you are doing and give them confidence to keep supplying
Funder
- Keep your funder fully informed of trading, good or bad. No one likes surprises
- If you can see a cash shortfall in the coming months try and agree a solution early
- If the bank cannot assist, there are alternatives out in the market
- Invoice factoring and invoice discounting can provide much needed injection of cash from your outstanding sales invoices
If you would like to find out more about how invoice finance facilities such as factoring and invoice discounting work, why not give our friendly team a call on 0845 602 9354 or alternatively browse our website for more information.