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Fix Your Cash Flow Problem

Post written by Justin Grace

There are only 3 reasons businesses fail: cash, cash and cash. Focusing on your cashflow has never been more important.

Despite the Government’s financial assistance, which can be found here, it’s more than likely, many SMEs are experiencing or will face cash flow problems as a result of Covid-19 and its terrible impact on the economy.

Fortunately, as dire as the situation may seem, there are things you can do to resolve your current cash flow troubles and prevent future issues from happening.

So how can you resolve your company cash flow crisis before the situation becomes fatal for your business?

Take Action

The first step is to face the problem and take action now rather than burying your head in the sand. It’s unlikely the situation will resolve itself.

There is a genuine risk that negative cash flow can mean your company is unable to pay bills when they are due or that its liabilities outweigh its assets. Suddenly, it can go from being a profitable and expanding business to an insolvent one.

Hire a Part-Time Finance Director

An easy way to get your company out of a cash flow hole is to hire a virtual part-time Finance Director (FD). He or she can help you to find, save and raise cash both from within your business and from external finance sources.

You can use the services of a part-time FD on an as-needed basis, saving you from the stress of having to handle the situation on your own but also the cost of hiring someone to fill the position on a full-time basis.

Talk to your landlord, HMRC, creditors and customers

Part of facing your cash flow issues involves talking with lenders, landlord and critical business suppliers for “forbearance on interest rates, capital repayments and terms of current overdraft where appropriate”, recommends the ICAEW Business & Management Faculty.

It’s also essential to maintain regular contact with your main customers, it says.

“Being in communication with key or major customers on a regular basis so you keep abreast of their circumstances” will also help with cash flow management, it says.

It also recommends you talk to HMRC and request more time to pay your tax liabilities.

Use short term credit facilities

You may be able to overcome a short-term cash flow imbalance by using company credit cards, your business overdraft facility or by arranging a short-term loan or an extension to your overdraft.

Just ensure the business can afford the interest charges on a loan, overdraft or credit card to avoid making the situation worse.

Be aware that a bank is likely to demand the Directors of the company provide a personal guarantee for a loan that is secured on the business assets or even their personal assets.

Negotiate with your suppliers

You can try negotiating with your suppliers for better payment terms. The vendors might not agree to cut their prices, but they may accept extending your payment window, from say 30 days to 60 or even 90 days.

At the same time, find out if other suppliers who provide the same product or service are willing to offer better terms.

Tighten your credit checks

Late payments or even non-payments can destroy any business, particularly if you are reliant on only a few customers. That’s why it’s so crucial to carry out credit checks on all new clients.

Issue invoices promptly

Make sure your business issues invoices are sent by email on the day products or services are delivered and that late payments are actively pursued. The invoices should be followed up to check they have reached the right person and they are correct.

When creating contracts for large orders or long-term projects, make sure the charges are staggered. This way, your business will receive partial payments over the term of the project rather than one lump sum at the end. It will make it easier to maintain a healthy cash flow.

Use asset financing

If you need cash quickly, you could use company assets as collateral for a loan. Be aware, however, that banks and other financial institutions will only be interested in assets of high value that are easy to convert into cash.

Consider leasing or selling assets

If your company owns assets that aren’t necessary to the running of the business, you could consider selling or leasing them to boost your cash flow.

Offer discounted stock sales

If you have a stock line that is slow to move, consider offering it at a discount or as a bulk purchase. It may help you to free up valuable warehouse space and to generate some vital cash.

Use invoice discounting

Banks and invoice discounting companies may be willing to lend money that is secured against your debtors/receivables. Typically, they will lend up to 80% of the invoice amount within 24 hours. But the costs are likely to be higher than any overdraft or loan charges.

Audit your business finances

Review the company’s income and outgoings to find where improvements and savings can be made. Make sure you don’t make sweeping cuts that end up harming the business. It may be better to consider a new product or service rather than capping overtime hours, for example.

Use cash flow forecasts

Create cash flow forecasts and use them to better prepare for cash flow shortfalls in the future. Make sure they’re updated regularly. Use a computerised accounting system that can provide you with an accurate picture of your company’s cash position daily along with monthly management reports.

Avoid the feast and famine cycle

Use both online and offline advertising and marketing to ensure the business has a steady flow of new customers or contracts. This will help you to avoid a situation where one contract or project ends, and you have to scramble around to find new business opportunities.

How to Resolve Your Cash Flow Problems

To find out how FD Executive Solutions can resolve your cash flow problems, or to help you restructure, grow or sell your company, call us on Tel: 0330 311 2550 for a free consultation or email us now at

About Justin Grace

Justin Grace is the Managing Director of FD Executive Solutions, a business that supplies expert Part-Time Finance Directors who have spent their corporate careers working in variety of sectors and organisations, bringing a wealth of skills and experience to make a difference to their clients. He can be contacted at

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