How To Increase Your Cashflow

Many companies experience cashflow problems over their first few years of operation. Whilst a few such issues are to be expected, if it becomes a habit then inability to meet financial obligations will soon destroy your commercial reputation, and may even lead to insolvency.

Effective Forecasting

The first step towards increasing your cashflow and avoiding any payment issues is to know exactly what you are spending, when, and on what. As well as putting together an accurate budget and keeping comprehensive records of your spending in the past, you should ensure that you have a realistic cashflow forecast. This will enable you not only to see when you may need an injection of funding, but also what particular functions are causing your cashflow issues. Only when you have worked out why your expenses are outrunning your income will you be able to investigate the best solution.

Payment Terms

One of the most common cashflow issues is that your payment terms are wrongly calibrated. The essence of a cashflow crisis is that you do not have the right amount of money at the correct time to meet your obligations. Obviously, one way of fixing this is to give yourself more time to pay your debts, or to reduce the amount of time in which you are waiting for payment. Your suppliers may well be willing to give you more favourable terms, particularly if you are a regular customer. On the other side of the equation, whilst you do not want to pressure your clients needlessly, you may be able to encourage faster payment by offering discounts or similar incentives. You certainly should make chasing late payments a serious business priority.

Cutting Expenditure

If altering your payment terms does not fix the issue, you will need to look at the possibility of cutting expenditure. Examine every process in your business and make a judgment as to whether it is necessary. Make sure, however, that you consult both staff and repeat customers before changing anything significantly. What seems like a redundant step may well be highly valued by your clients, and you will only find out when they protest! Good management may also make a contribution here, as you may be able to train your employees to perform more than one important task. Just make sure not to overload them, as staff morale and efficiency is always important.

Finding Finance

If you are unable to find major savings in your commercial processes, then you will need to increase your cashflow by securing extra finance. This can be done not only through a traditional bank loan, but also by innovative methods such as asset finance and debt factoring. The former allows you to release money by using existing assets as security for a loan, whilst the latter provides you with an up-front injection of cash in return for passing the rights over your invoice book to a finance agency. Whatever your cashflow situation, there is likely to be a financing solution suitable for you.

We can offer you financial solutions to help keep your cashflow healthy. Request a quote now to find out how much invoice finance can save you.

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