It’s the oldest adage in the business book – Cash is King.

The brutal truth is that many a good and profitable business has crashed because it ran out of cash.  If you don’t pay your bills, CCJ’s, administration and insolvency inevitably follow.

The good news is that there are things that you can do that might not only save your business but prepare you and it for the upturn that must surely come.

Cash-flow Forecast.

The top recommendation must be to build a cash-flow forecast.  I’ve seen some very simple cash-flow forecasts, whilst sophisticated forecasts that reflect the complexity of the business sit at the other end of the spectrum.  Both  identify with great clarity what the cash position is today and what it will be at specific intervals into the future, enabling you to manage the situation utilizing every available resource.

Government support.

Furloughing employees, small business grant funding, deferring income tax and VAT, HMRC’s time-to-pay scheme, statutory sick pay rule changes and the business interruption loan scheme are all mechanisms designed and granted by the Government to enhance cash availability.

Cash Management.

There may be more that you can do by issuing invoices daily or weekly, chasing debtor payments efficiently, agreeing longer payment terms with suppliers and cutting overheads (check line by line through the profit / loss account).

Cash Sources.

If, having applied every source of Government assistance and improved your own cash inflows from the business, you still see a shortfall, consider additional sources of funding.  This could be by overdraft, loan or invoice finance, or alternative sources.  What the banks really dislike is being surprised.  Give them plenty of warning and a well drafted plan and they will look on your application with a great deal more favour than if you ring up on Monday and say you’re going to run out of cash on Friday!

Do your forecast with honesty, review your situation with realism, evaluate your options and then take determined action in full knowledge of the desired outcome.

To discuss anything I’ve said in any of these articles, use the contact button below and we’ll arrange a call.

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