It is a well known fact that many highly profitable business fail due to insufficient working capital and cash availability. The following tips are intended as general ideas of how to make more cash available for your business. Whist they are aimed at UK business, they may be of assistance to businesses around the globe:
Negotiate better terms with your suppliers – can you extend your credit period with your suppliers and hence pay them later.
Reduce your debtors – keep on top of all debtors, chasing any late payments as soon as they become overdue. Consider offering an early settlement discount to encourage early payment. For slow paying debtors think about enlisting the help of a Credit Management Agency.
Reduce stocking costs – review carrying only essential stock items. Consider implementing a Just In Time stocking approach. Carry out regular stock takes to identify slow moving and obsolete items, make sure that these are not ordered. If stock items are perishable, carry only minimal amounts and ensure the oldest is always used first. Possibly offer discounts on stock nearing its sell buy date.
Review bank borrowing – this could produce immediately available working capital, but be aware of the costs. Bank borrowing can be in the form of mortgages, unsecured loans, secured loans, overdrafts, invoice discounting and factoring etc. It is worth negotiating hard with a number of banks to reduce lending costs.
Lease equipment instead of buying. Again check the costs but financing equipment either via hire purchase, lease purchase or simple leasing could release essential working capital.
Produce a cash flow projection and update it on a weekly basis. You should know as accurately as possible what your feature cash position will be, in order that you can make timely changes to manage it.
Speak to a grant adviser to see if there is any public funding available.
Consider the financial structure of your company. Consider raising money from new share issues, loan stock and preference shares.
Obtain professional advice from a Chartered Accountant. Chartered Accountants can help you manage your business effectively.
If you are struggling to pay taxes then try negotiate payment terms with HMRC as soon as possible. Since the onset of the economic recession, HMRC have become more flexible with tax payments. The key here, is let them know, negotiate an arrangement to pay and keep to it.
A Bonus tip! Remember the old sayings, “Cash is King” and “Profit is vanity, whilst cash is sanity”!
The author does not guarantee the accuracy of any information provided in this article and recommends that you do not take any action, whatsoever, based on the information provided. By the fullest extent permitted by law, the author does not accept any responsibility for any actions you may or may not take based on information contained in this article. This article contains general information and is not a substitute for specific independent professional advice.
