The definition of cash flow is the movement of money in and out of your business. In order to have positive cash flow, you need more money coming in to the business than there is going out. This ultimately means your business will be able to settle any bills and importantly, invest in growth.
Our Cashflow Clinic has been set up to help SME's with cashflow finance advice, tips and resources to help with their cash flow position. We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.
A common reason businesses can suffer cashflow finance problems is having to wait 30 - 90 days to receive payment of invoices or experiencing late invoice payments, which can be a serious financial strain for a business. Invoice financing has become a popular solution for businesses due to its simplicity and providing funding to businesses quickly to improve their working capital.
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Cash flow is one of the biggest financial challenges that any small business will face. Without readily available cash, it can be really hard to push on and grow the enterprise, and in severe cases, it can even threaten the viability of the business. This happens when cash flow is so poor that there are few funds available for things like payroll, rent, and other essential monthly commitments. But what some of are the biggest problems with cash flow for small businesses?
It’s worse for some industries than others, but any business owner or accounts officer will know just how expensive it can be to keep a modern firm going. It’s these (often monthly) expenses that are what really eats into cash. Any business that’s finding that too much cash is leaving the accounts every month might look to making some cuts, or looking for alternative and cheaper suppliers. Never do anything that might impact profit however, as this could ultimately make matters worse.
Unpaid invoices are perhaps the biggest contributor to problems with cash flow, and they can affect businesses of any size. At any time here in the UK, hundreds of millions of pounds are outstanding, and this can be really harmful. Fortunately, if your biggest issue is late invoices, there are plenty of ways you can improve the situation. Tightening up on credit control, effectively tracking and chasing invoices, and being careful with terms can all help to get those invoices paid when they’re due. There are also financial products on the market, such as invoice finance, which can help remove some of the worry over late payments.
A lack of profit will naturally mean less cash coming into the business. Start-ups can often face challenges in this regard, because their unestablished reputation can make it harder to secure lower rates for goods and services that they might then sell on. This is why it’s so important for new market entrants to be able to offer something different to competitors. If you can ensure your product stands out - whatever it may be - then you stand a better chance of being able to apply a strong profit margin that doesn’t have to directly compete with other businesses.
Finally, a lack of planning can actually be much worse than you might expect. The dates that money comes in and goes out can have a surprisingly large effect on cash flow, and poor planning in this regard might mean dipping into an expensive overdraft unnecessarily. As best you can, forecast for when you expect money to arrive and leave the accounts. This will leave you better prepared, less likely to experience short-term issues, and less likely to need help with your cash flow.
Cash flow is widely understood to be the lifeblood for businesses both small and large. Without it, it can be difficult to meet those monthly commitments, such as rent, wages and product costs. Unfortunately, it’s very common for SMEs to have cash flow problems, arising for all manner of reasons. Fortunately, there are a few different ways to improve cash flow:
It seems obvious, but one of the key ways you can resolve cash flow problems is to improve the difference between your income and outgoings. Generating new revenue is clearly the trickier element to this, so you should look to free up cash each and every month as a first port of call. Many businesses are surprised by the amount they can save through a diligent fact finder that looks at where costs could be saved.
This isn’t about having a knee-jerk reaction and making sweeping changes to the business - it’s about looking at how small savings can quickly add up. Contracts for things like energy and insurance are two places in which another look at the market could end up saving you a considerable amount of cash. Go to the different parts of the business, and see where people have ideas to reduce costs without fundamental changes to the way things work.
Late invoices are one of the biggest contributors to cash flow problems. Often, a business is successful, and balancing income and outgoings isn’t too much of a problem. However, if customers aren’t paying their invoices when they should, it can make bringing cash into the business really difficult. There are a few ways you can improve this, at various stages in the process. The first thing to bear in mind is that you need to make invoice terms as clear as possible, which will reduce the likelihood of customers pushing things to the limit. You’ll also need to take a proactive approach to chasing invoices when they fall late - never allow a late payment to be your own fault for not chasing enough.
There are a variety of financial products available on the market that can help you get round cash flow issues. Overdrafts can be useful if you find that you rarely have cash flow issues, perhaps at certain points of the year. You can use the cash when you need it, and then repay when things even out, without having to have an ongoing commitment or negotiate every time you need finance. Invoice Finance is another option that seeks to resolve the issue of cash flow, particularly when it comes to late payments of invoices. In short, it means that you don’t have to wait for a customer to pay to receive money into your account.
New research has revealed that more than one in 10 (12%) SMEs would have been at risk of closure had the scheme ended in April.
Read our quick tips on how simple changes can improve your cashflow.
Great, you have decided to choose Invoice Finance for your business cashflow solution. You will have seen from your online research that there are many independent providers offering solutions. We have developed this quick video guide to outline what you need to look out for when selecting the right Invoice Finance provider for you and your business.
As a business owner of an SME, you have probably researched the different finance options available to you and seen that the options are endless. We have created this quick video guide to highlight the most poplar funding methods and the advantages and down sides of each one. We hope this helps to give you a clearer understanding.
Here we explain why invoice finance can be a great alternative to improving your cashflow position than simply applying for a bank overdaft.
There are many choices when selecting the right provider for your Invoice Finance and cash flow solution needs. We have put together this quick video to inform businesses of the different things to look out for, and what the benefits are for choosing an Independent over a traditional Bank.
We offer a seamless transfer from your existing provider. We'll contact your existing provider and organise the transfer of your invoices to our facility, and ensure that there is no disruption to your funding. That way, you can rest assured that you will always have the cashflow required to continue running your business.
Watch this quick 30 second video to see why you should consider Hitachi Capital Invoice finance for your Cashflow Finance solution. We have invested in market leading technology to provide a digital application to our prospects. This allows clients to access their money quicker, faster and simpler. Watch the video to find out more.
An invoice finance facility is a finance facility provided by an invoice finance provider to help business owners leverage their unpaid invoices in order to provide an instant cash injection into the business. Find out more about all of invoice finance products and how we can aid your business growth in the link below.
Invoice discounting is an invoice finance facility when a company's unpaid accounts receivable is used as collateral for a loan. Click below to see how we can support your business with our invoice discounting solutions.
Invoice factoring is where a business sells its invoice (accounts receivable) to a third-party factoring company (the factor). Click below to find out more about how our invoice factoring solutions can help your business with its cashflow.
Debt factoring is another term for invoice factoring and is a great way to improve your cashflow position. Click below to find out whether our debt factoring product can support you with your cashflow needs.
Head to our Government Support Timeline for all the information you'll need on cash flow support provided throughout the pandemic.