Cash Flow Problems and How To Fix Them

Healthy cash flow is the lifeline for businesses. Cash flow provides stability, day to day running and allows for growth.

We explore some of the usual cash flow issues businesses have and provide some points on solutions on offer.

1. Annual Peaks & Troughs

Many businesses experience seasonal business trends. This can have an effect on their cash flow.

Planning: By understanding your peaks and troughs you can plan for cash injections at certain times of the year
Management: Do you manage and offset money for HMRC payments, wages and other payments needed at points in the year

2. Supplier Payments

One of the primary culprits of cash flow problems can be suppliers who have long payment terms paying invoices. This delay can lead to a domino effect, affecting your ability have the cash to pay employees, customers and other essential expenses.

Clearly agree your payment terms to supplier’s from the outset. Larger suppliers might push for longer terms 60-90 days, but others with usually be on 30 day payment terms.
Invoice discounting solutions can help with a short fall of cashflow by raising money against owed invoices.

3. Quick Growth

A catch 22 situation! Sometimes quick growth leads to cash flow problems. The need to invest in expansion may outpace the revenue generated.

Explore different funding options, such as debt funding or investment options to accommodate the growth you’re going through.
Plan and make sure you have management accounts and financial forecasts to anticipate growth stages so you can cope with the change.

4. Overhead Cost

From staff costs, location / rent costs through to increased utility cost, these all can take a strain on a business Cashflow.

Make sure you have a planned forecast for sales and WIP for incoming revenue.
Breakdown priority areas so that overhead costs don’t all happen at one time.

By addressing these common issues you can move forward with a healthier financial future for your business.

Please feel free to share or get in touch if Elite Money can help talk through any of these areas and help in any way.