Solving Cash Flow Issues: Quick Guide

Cash flow problems affect businesses of all sizes and for many different reasons.

We work with businesses to help them overcome these cash flow problems by offering fast and flexible financing solutions.

If you are experiencing cash flow problems and need a loan of between £10,000 and £1m, please get in touch to speak with one of our commercial lending experts on 0161 451 5710 or email sales@reparofinance.co.uk.

Hundreds of businesses see us as a trusted partner that can advise and support in a time of crisis. In many instances, we deal with situations where cash flow problems are immediate and severe – we’ve seen every imaginable problem and know the best financing solutions to help your business.

Read on for our key tips to make sure cash flow problems don’t derail your business.

Cash Flow Guide

Four key principles underpin great cash flow planning:

1. Planning
2. Efficient Systems
3. Credit Control
4. Engaging with Lenders

Planning

For many seasonal and project-based businesses, cash flow management is a constant challenge. Using a forecast, you should be able to predict most scenarios where cash flow issues will arise.

By having a cash flow forecast that projects six or twelve months into the future, you’ll be able to estimate pretty accurately when cash flow issues will manifest.

By setting a budget you can track how you’re performing; if the business is underperforming, you can see the impact of this six months down the line. With modern accounting software like Xero or Quickbooks, this is easier than ever.

All businesses – whether they normally face cash flow issues or not – should put some risk-based planning in place. You should always budget for an ‘unforeseen event’ whether this is a delay in payment, problem with your suppliers, weather-related issues, staff issues, or any number of potential events that could result in cash flow being affected.

Efficient Systems

Systems act as the early warning system for cash flow planning, and effective systems will make dealing with issues easier.

The first critical step in implementing cash flow management systems is making sure that all the key information is collated in one place and updated regularly. Cloud-based small business accounting providers can easily link to a business bank account, so it’s easy to have your costs and revenues collected in one place.

A good system will also provide key information; helping you determine:

• Whether you are meeting your cash flow budget.
• How long it takes debtors to pay invoices.
• When cash flow risks are likely to manifest.

Credit Control

Many SME’s struggle with effective credit control, it is key to start with:

• Appropriate terms with customers and suppliers.
• An effective policy to chase cash.

Setting Credit Terms

The credit terms you offer will depend on your business, and this seemingly small decision can have big implications. We often see businesses that have payment terms and credit terms that are out-of-sync; for example, they offer 30 day payment terms and are invoiced by suppliers on 14 days terms.

This is a common problem in construction where contractors need to pay workers on weekly or monthly terms and are paid on 60 days terms or longer. In certain sectors, it is hard to manage these issues, but a business should always ask the question: what can be done to improve cash flow? Credit terms are a key tool for this.

Similarly, credit terms with suppliers should be monitored: businesses should always be looking to negotiate appropriate credit terms and match cash flow. Common terms are (i) payment at month end; or (ii) month of invoice plus 30 or 60 days. Watch out for this and invoice appropriately. Otherwise, payments expected on 30 days can easily extend to nearer 60 days.

Getting the best possible credit terms with clients and suppliers is a long term process and one that needs to be a key focus. To make this process more efficient deploying a credit referencing software solution like Red Flag Alert is a sensible step.

Chasing Payment

It’s important to have a systemised approach to invoicing and dealing with late payment. Ensuring the data is collated is a critical first step before building an operating rhythm for invoicing and collecting late payments.

Invoicing on the same day every week and having a series of predetermined chasers that increase in urgency to collect payment is important. Late payers will tend to pay whoever is shouting the loudest – in a professional and controlled way make sure you shout the loudest.

Engaging with Lenders

At Reparo we are comfortable dealing with lending requests from businesses that have come to us late in the day and also providing financing to businesses we have long term relationships with.

However, we’d always advise against last-minute financing. Build a relationship with a lender so they can understand your business and be ready to act when cash flow problems arise. If you have a relationship with a lender, it will help whether your cash flow issues are anticipated and managed carefully or have come about because of an unforeseen event.

If your business has regular cash flow challenges or you want to discuss lending in the event of a number of scenarios then reach out to lenders.

At Reparo we are always happy to discuss your financing needs, both long and short term. You can reach one of our expert commercial lenders on 0161 451 5710 or sales@reparofinance.co.uk.

Reparo: the Perfect Partner for your Business

At Reparo Finance we review, approve and complete loans quickly: we work to your timescales, not ours. Unlike traditional lenders, we take the time to understand your business and make lending decisions based on your specific circumstances.

Our team are all highly experienced in commercial lending, and we focus on being a trusted partner that enables you to get on with running your business.

To discuss a loan between £50,000 and £1m, please get in touch with one of our commercial lending team on either 0161 451 5710 or sales@reparofinance.co.uk.