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• 09 Aug

  How To Improve Your Business Cash Flow

  How To Improve Your Business Cash Flow

  Three simple steps how to improve the cash flow of your company are explained in this short explainer video:

  Additional Help With Your Cash Flow

  For further help improving the cash flow of your business, we have some additional resources that will be of interest.

  Firstly we have an article which explains 10 steps that you can take to increase cash flow.

  Using Invoice Finance To Improve Cash Flow

  Secondly, if you are looking for a cash injection into your business, you can use invoice finance to release the money that's tied up in your unpaid invoices. Also, please see our guide to invoice finance, which explains how these working capital financing products work to dramatically improve the cash position of your company.

  How Factoring Improves Cash Flow

  To see the details of how the funding generated by factoring affects your company's cash flow forecast, see this example: The Effect Of Factoring On A Cash Flow Forecast.

  Lastly, please see our article: How To Increase Working Capital.

  Cash Flow Planning

  By controlling your cash flow as you go, you can avoid running into problems. These are a few ideas about how to plan for the future to avoid issues:

  1. Produce cash flow forecasts regularly. These start with an opening balance of cash on hand and project forward the cash receipts and expenditures from your company over a given period, often month by month. You might produce a forecast monthly (projecting forward for the next few months) or in some cases even more regularly if you have creditor pressure.
     
     This allows you to see where you are going to have liquidity problems that may need to be solved. For example, if your cash receipts are expected to be £50K and your expenses £55K, your forecast shows a deficit of £5,000. You now know that you will need additional working capital of that amount (or preferably more) to ensure that you can survive that issue.
     
     
  2. Model different scenarios. When undertaking this type of financial planning, it is wise to model different scenarios e.g. what if your biggest customer pays late, what if a customer fails, and what if your receipts are 10% down in a particular month? You might want to consider your supply chain, what happens if a supplier withdraws or limits your credit line?
     
     By doing this you can see where you might have pressure and plan to avoid that scenario. In the late payment, or reduced inflow examples, you might use invoice financing to bridge the gap, and a non-recourse facility could help you avoid the impact of customers not paying.

  By Glenn Blackman