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• 03 Nov

  How To Get Extra Cash Flow

  

  Managing your company's cash flow can be an almost full-time task if your finances are tight. The current economic climate in the UK may also be making it difficult for you to smooth out the cash flow requirements of your business. Things such as delays in customer payments and increases in supply chain costs can add to the pressures.

  There are ways that you can get extra cashflow for your business. These range from improving the speed with which your customers pay to raise extra working capital through new financing.

  How To Get Extra Cash Flow

  We have written a comprehensive Guide To Business Cash Flow which you can read for free. It sets out exactly how money flows through a business and the things that you can do to try and improve the flow.

  Methods Of Improving The Flow Of Money Through Your Company

  Our guide sets out a number of ways that you can speed up payments from customers and reduce the outflow of cash to suppliers and creditors. These include improving your credit control and seeking extended credit terms from your suppliers.

  Ways Of Adding Extra Working Capital From Additional Financing

  The guide mentioned above also covers how you can inject additional working capital into a business by seeking financing or additional investment.

  These are some of the more popular financing facilities that you could seek and the effects that they can have on your cash flow position. These are ways of adding extra working capital to your business without giving up any control to investors.

  Popular Forms Of Business Finance

  1. Overdraft - if you draw down a bank overdraft it can improve your cash position. However, there will be interest charges and fees that could also increase your monthly expenses. As long as the overdraft remains in place, you don't need to make repayments of the capital sum - however, you will continue to incur charges for that borrowing.
     
     
  2. Business Loans - again the sum of the business loan can introduce a large amount of new working capital into your business. You will have to make regular (usually monthly) repayments which include interest/charges AND repayment of the capital sum. Again, these repayments can increase your monthly expenditure.
     
     
  3. Invoice Discounting - these facilities can introduce additional working capital into your business. There will be fees for using the invoice discounting service, but if your sales ledger remains stable, the facility can revolve, i.e., as invoices repay your funding, new invoices release new funding. If your sales turnover grows such that it increases the value of your sales ledger - so does your funding level increase. One facet of this type of financing is that you continue to collect your own sales ledger.
     
     This type of financing against your receivables can sometimes release more money than loans or overdrafts, especially where the primary asset of a business is its sales ledger of unpaid credit invoices owed by customers.
     
     
  4. Factoring - arguably this can have the greatest positive impact on your company's cash flow. In addition to the benefits of invoice discounting stated above, a factoring facility can also include a professional outsourced credit control service. This can reduce your costs, e.g., you may not need to employ a credit controller. Also, factoring companies can often improve the debt turn of their clients. This means that they can sometimes increase the speed with which customers pay by implementing a sound credit control approach.
     
     Also, the risk structure of factoring services often means that a more liberal approach can be taken to funding. This can enable additional prepayments to be released over and above those released by an invoice discounting facility.

  By Glenn Blackman