It is a fact that all businesses have cashflow issues once in a while. But if you think that your business is heading for a downward spiral when it comes to cashflow management, it may be time to take more drastic measures in order to not let it get out of hand and affect your business success in the long term.
If you would like to avoid cashflow issues such as not being able to pay your employees’ wages, your suppliers, or simply not being able to take care of your operational expenses, you need not fear: there are certain steps you can take, and these are outlined below.
Make a detailed plan of your cashflow requirement
One thing you must make sure of from the beginning is that you have a detailed cashflow requirement plan. Make a list of what you expect to receive from each customer, and make allowances for various differences when it comes to each customer’s terms of payment and your own payments and expenses. Additionally, check your cashflow requirements and forecast regularly, so you can update it if need be (i.e., if you have new customers, if a customer has changed their payment schedule, if you have a new project that needs finances, and the like). Closely monitoring your cashflow requirements and forecast also allows you to spot any problems or issues and address them even before they occur.
Assess your cashflow and customer payments
There are certain questions you need to ask yourself as well to be sure that you are on top of your cashflow. One of these is whether or not you have sufficient cash on hand to meet whatever commitments you have, even before you receive payment from your invoices. Another question is whether your main customers are responsible with their payments to you, or whether you constantly have to deal with late payments or payment extensions. By knowing where you stand, you have a better chance of dealing with cashflow issues before they become worse.
Keep your suppliers informed
If, by checking your payment dues and cashflow requirements, you notice that you will not be able to pay a supplier on time, notify them of this as soon as possible. If you talk to them early, there is a greater chance that they will be easier to negotiate with and be more flexible with their payment terms. It is also a good practice for enhancing your business reputation, as you are showing your suppliers that you are honest and genuinely concerned about making payments.
Make preparations for unavoidable cashflow problems
If you see your business having further difficulties with cashflow, just be honest with whoever you owe – whether it’s a bank or other financial institution, your suppliers, or your employees. Do not avoid talking about your issues and be direct to the point as soon as you know that you have cashflow difficulties. You do not want to avoid talking to suppliers and creditors and then end up with legal action, which will just result in more problems for you later on.
Another thing you can do in order to deal with cashflow issues is to opt for a cashflow solutions service. This can be provided to you by cashflow providers such as Ultimatefinance.co.uk. You can choose from different cashflow services, such as factoring or invoice discounting, where you can receive cash and draw funds in advance based on your expected earnings from your invoices, or other services that include asset finance, trade or construction finance, and more.