If you own a small business, there is a chance you have faced this issue. Ideally, the best step is to seek advice from cash flow consultants and plan ahead to avoid being short of cash. Here are suggestions to the steps you can take to navigate a cash flow crisis.

Understand the profitability of your company and cash flow

If your company is not profitable then it will not generate cash. If you only know how you have done after the year end when your accountant tells you how your profitability is indeed a loss, then this is far too late.

Ensure that you have monthly management accounts that are accurate and are produced in good time. Ensue that your drawings can be afforded.

Forecast Cash flow

A forecast cash flow is essential. If cash rich, this can be done annually. But if tight then at least monthly. If extremely tight then daily is essential. Make sure you understand the unwinding of your present trade debtors and creditors and effects on stock. Remember payments that are not every month are incorporated such as rent, rates, corporation tax, personal tax payments, bonuses, plus any need for CAPEX. 

Speed Up Your Revenue Streams

Ensure that you send invoices earlier and more frequently, offering convenient ways to pay to ensure customers pay their accounts as soon as possible. The sooner the invoice arrives, the sooner most customers will pay.

As well as this, ensure that your invoicing is as accurate as possible by understanding queries and credit notes. 

Send Invoices Electronically

One of the most important parts of quickly ensuring invoices are paid is to ensure there is an electronic trail that shows when the invoice has been sent, to which department and that it has been received

The best way to ensure all of this is to use a dedicated invoice management system or indeed Outlook that will automate these steps and provide unequivocal proof that the invoice was sent to the right place at the right time, avoiding possible disputes. This also stops the excuse of we did not receive the invoice.

Tighten Credit Control Policies

Giving extended credit terms is a cash killer so try to avoid this. Have a person responsible to credit control and where clients are poor payers consider putting them on stop. You then must communicate and record where the invoice is in their system for paying with follow up actions of regularly paying, with potentially shorter-term credit periods to ensure quicker reimbursement.

 Negotiate Outgoings

One option, if speeding up your invoicing is not delivering enough, is to negotiate your bills and invoices to other companies and find ways to negotiate, delay payments, extended credit terms or set up payment plans to pay later.

This does not always work, as many suppliers are as reliant on their cash flow as you are, but in some cases, particularly with suppliers that trust you, you have kept your promises and you have been loyal to, they can be flexible and willing to help you through a tough situation.

 Keep Your Bank Up To Date

When handling any kind of business issue, honest and frequent communication is the best option. By ensuring banks and other financial stakeholders are aware of the situation, you have room to negotiate terms that can help you with the immediate issues and plan for the future. 

One Payment Run Per Month

When you are running payments, try to group them as much as possible.

This is useful for businesses in the same way it is useful for customers; by having a regularly scheduled day where all the payments are made, you can prepare in advance and factor in this big payment into financial forecasts.

As well as this, it avoids the extra expense and problems caused by having to undertake a second payment run.

If a payment is missed during this expected run, be clear, transparent and explain why this is the case, and ensure that you keep any payment promises you make. 

Invoice Discounting

Consider invoice discounting where effectively cash is advanced on the collectability of your sales invoices.

If you are looking for cash flow consultants, please get in touch today.