Business: Cost of Living support

Every business has its own challenges, but there are some patterns that emerge.  This includes:

• Initial underfunding - this is a common issue that is frequently caused by underestimating the amount of cash required.
• Insufficient sales and/or profit margins - if you can’t sell enough products with the right profit margin, the business won’t be able to pay its bills.
• Fast but poorly anticipated growth - sudden expansion often needs investment well in advance of the associated revenues.
• Too much money tied up - cash invested in non-liquid assets, such as stock or machinery, could leave you with insufficent funds.
• Late payment - poor invoicing and unsuccessful debt collection efforts can be  quite expensive.

These instances all have one thing in common: a shortage of cash on hand. Even businesses that are performing well by other measures, such as sales and margins, might experience cash flow problems.

For your business to survive, the money coming in each month, along with any reserves and lending facilities, must at least match your outgoings.

Make forecasts for the months ahead while considering sales and anticipated cash flow. Take control and move quickly if they start to fall short of expectations.

Regularly ask yourself the following questions:

• Are my sales falling?
• Am I losing market share?
• Do I have a worse reputation compared to my competitors’?
• Am I taking out more loans to cover expenses?
• Is it getting harder to pay my creditors?

If there are warning indications, it’s best to take immediate action

At first glance, issues might not seem all that significant. Sales might be slightly down or the cash coming in might not meet outgoings.

Businesses frequently carry on as usual in the belief that the cash flow and sales figures would increase next month. However, if figures don’t improve, the business could be overrun with demands from suppliers, and it might be challenging to pay staff.

The key is to take control and implement strategies that will help in the recovery and growth of your business.

By spotting early warning signs, you’ll be in a much stronger position to make things right.

For instance, if your cash flow issues are related to sales figures, then trading your way out of the issue could be a first step. If the resources are accessible, increase your sales and marketing whilst explore into new markets.

If the delay between issuing invoices and receiving payment from customers is affecting your cash flow, you can:

• Tighten credit control. Ensure invoices are delivered on time. Chase payment when it’s due
• Explore invoice finance options, where you could borrow money against the value of your existing unpaid invoices
• Monitor the financial health of your customers and suppliers
• Modify payment periods

If there is no chance of sales improving, then you may want to consider other options. This includes freeing up cash by selling assets, or cutting costs and/or inventory.

You’ll be more likely to get the assistance you require if you schedule regularly conversations with your bank.

For instance, if rapid growth from the business has left you cash-strapped and you inform your bank of this early on, they are more likely to provide the funds you need.

They’ll also be more inclined to offer solutions such as invoice discounts, if they see that you responded to issues quickly

If your financial circumstance puts your capacity to repay previous debts, banks are more likely to be sympathetic if you approach them early and present a credible business plan. Investors (if you have any) should also be updated on the situation.

Please get in touch as soon as possible if you are currently struggling.