Small changes that can improve your cashflow – take some positive steps in a difficult marketplace

  • Published on 23rd March 2023
  • Published in Latest News


In our professional capacity at Smart Business Recovery Limited, we see businesses that are struggling with the current economy to a greater or lesser degree every day. It’s tough out there at the moment. However, while things are certainly not easy right now, there is a lot you can do to reduce the impact of a difficult economy.

Sales help but they are not the full story.

When things get tough, we all tend to focus on the most obvious response and try to bring in more revenue. That’s fine and absolutely a good idea, but it needs to be part of a bigger strategy. At the end of the day, the thing that usually ends up closing a business is not a lack of incoming sales, it is a lack of cashflow. It doesn’t matter how many sales you make if you can’t pay the bills. In fact, insolvency is pretty much literally that. It means you don’t have enough money to hand (or available) so that you can keep trading.

Cash, as we always say, is king. So, one of the most effective tactics for surviving a difficult economy is simply to ensure it keeps coming in regularly. We commonly find that when we see a business in trouble they lack cashflow more than they lack the potential to make money.

Having money in the bank and knowing more is coming soon is the best situation for a business. So here are a few ideas that may help you to keep that cashflow moving.

Know where you are at all times with cashflow
Knowing your exact position is probably the most valuable weapon in your arsenal when it comes to business finances. We often see people who tell us they had an unexpectedly high tax bill or that a supplier bill caught them by surprise. Well, they really, really, shouldn’t be surprises. With the exception of something extraordinary, all business bills are regular payments or clearly due on a particular date. This is also true of income (providing you do get paid of course – see below). So, if you know the ‘when and what’ of your income and expenditure then you will be able to plan for your cashflow. Sadly, many businesses simply don’t take the time to look at these in relation to each other and find themselves wondering what happened to that ‘good month’ they expected to have, while also wondering how to pay the wages.

Work with your suppliers and customers
One of the biggest issues businesses can face when dealing with recessions or downturns in a market is the instability it can cause in your cashflow. Getting paid regularly and on time is always the holy grail when it comes to the flow of money through your business. So, if that isn’t going to happen, then it’s better to know in advance. Now is a good time to re-affirm business relationships so that you can have an honest dialogue about payment terms and any potential problems. B2B based companies often tell us that they are surprised when a regular customer suddenly stops paying on time. When they ask why, they are told about problems they could have dealt with through split payments or other methods before it was too late. You are all in the same boat so an open dialogue about how things are going is always going to help. If there are going to be issues around supply or payment in either direction, keeping a good relationship going will reduce the potential for any nasty surprises.

Review your terms and conditions
Following on from the previous point, is it worth reviewing and firming up your terms? In particular, keep an eye on customers who are not paying on their actual terms. It’s easy to let these slip particularly with long term customers who ‘always pay in the end’. Well, sadly, this can be a common problem if one day they don’t do that, and you have a bad debt to deal with. If that happens on an account where you have already allowed your payment terms to become extended, it can have a huge impact on your finances and mean extra weeks before you see the problem.

Don’t wait for the hammer to fall
If things do start to look a little gloomy with cashflow – do something about it. Step up your credit control, look to make cuts in costs, take charge of your forecasts and run various scenarios. I know it’s hard but if you are going to need to make some difficult decisions then you may as well get on with it. Nothing will get better by waiting or avoiding the situation. There is a wonderful saying ‘You never plough a field by turning it over in your mind’ and it is very true here. Review the situation dispassionately and logically and if your conclusion is to take action… take it.

That last point above is really important. One thing that is almost universally true about companies we see who are unfortunately going to have to go down the insolvency route, is that earlier action would have helped. It may not have reversed things, but it would always have made things easier.

So, keep positive, things could be a lot worse, but also stay logical and realistic so you can take action and ask for help as soon as you need it.

Written by Sharon Hill, Smart Business Recovery Ltd
Tel 01926 671891

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