5 Solutions To Your Cash Flow Problems
Whether you’re an SME, start-up, or multi-million international organisation, cash flow problems can still arise. No matter your profit margins, ensuring your cash flow remains healthy should be a constant consideration, especially if your capital is tied up in existing stock, or if you would like to invest in your business for new growth opportunities.
Here are our top 5 solutions to cash flow problems that should provide you with valid management strategies before they cause your business major issues.
1. Overheads audit
Overhead expenses can cause some cash flow problems – hardly surprising when there are so many annual charges to pay. Charges can apply on rent, utilities, IT equipment and other expenses that do not even link back directly to the product or service you’re selling. If not regularly monitored, these overheads could impact directly on your cash flow, leaving you with little room for expansion.
One of the basic cash flow management strategies recommended would be a complete audit of your overheads. Have you considered how your expenses have increased over time? And is it worth reviewing your expenses in light of any recent changes to your outgoings? Only with an audit and ongoing checks of your expenses will you be able to identify the sources of your business cash flow problems.
Once you’ve identified the problem areas when it comes to overheads, you’ll then be able to take action.
Consider the following actions post audit to help you cut the fat:
• Haggle with utilities providers or go elsewhere
• Eliminate unessential expenses such as landscaping
• Switch your phone provider to an internet service
• Are teleconferences possible so that travel to meetings is kept to a minimum?
• Outsource tasks to freelancers where it may not warrant a full-time member of staff
• Do you share premises with another business? Rent out equipment to them for shared use or see if you can pool your budget for basic office equipment
2. Asset finance solutions that make investments more manageable
If the service you provide your customers is highly dependent on the use of equipment, whether that’s IT equipment or more technical machinery such as healthcare equipment, or agricultural machinery, you may find that purchasing it outright has a negative impact on your cash flow.
Asset finance could be an invaluable method of solving cash flow problems for your business, minimising the amount of capital you pay upfront. An asset finance solution could provide you with the business equipment you require to operate while reducing risk to your business. Plus, by spreading your costs into easily-manageable regular payments, there are no unexpected costs for the period of your asset finance contract.
In fact, where buying business equipment outright may cause cash flow problems and leave you with a large dent in capital, asset finance will do quite the opposite. With the right finance package, you’ll be able to spread the cost of your investment, often paying a small upfront payment for the equipment you need, then paying off the outstanding sum in manageable monthly instalments. You may be able to choose a fixed or variable interest rate depending on your requirements and, with many finance structures, you have the option to own the equipment once all instalments and purchasing fees have been made, giving the added benefit of using the asset as part exchange when you need to update your business equipment.
Alternatively, if you’re happy with business equipment that you already own outright, you may want to talk to your provider about refinancing …
3. Refinance and re-consolidate assets
If cash flow problems are putting a strain on your business, you may want to consider refinancing any existing assets to help you free up working capital.
How could refinancing assets help your cash flow problems?
Firstly, refinancing is usually only available for those assets which the business owns outright. However, some opportunities to borrow against the equity of the financed equipment may be available to you – ask your provider about all your options before you settle on a solution to your cash flow problems.
Your provider will then be able to lend against the value of the asset, helping you to free up the working capital tied up in your existing business equipment. Monthly repayments can then be organised so you can repay the provider at a steady, manageable rate.
When your business’s cash flow problems require a quick, simple solution, refinancing existing assets could provide you with a fast cash injection. Unlike traditional lenders who may only provide finance solutions on brand new machinery, those who provide a refinancing option can use the asset itself as security, so that you can receive much needed cash within a matter of days.
4. Invoice financing that releases cash when you need it
Are slow-paying debtors the source of your cash flow problems? Often, businesses may be strapped for cash when their invoicing cycle means payments don’t come back into the business until a month after the service or product was provided.
If your invoicing process is already efficient, where clients are being invoiced immediately after the project is finished and have clear guidelines as to when the payment is due, then you’re already onto a winner. But if slow-paying debtors are still causing cash flow problems, you may want to consider invoice financing.
A form of asset based financing, invoice financing will help you release the capital tied up in unpaid invoices. With an expert provider you could receive advance payment at a pre-agreed percentage of the value of the invoice. This helps speed up the flow of cash into your business and, depending on the service chosen, can also outsource the credit control and payment collection process too.
5. Business loans that take the pressure off
Still wondering how to solve cash flow problems? If you’re still struggling to implement the above cash flow management strategies, you may want to apply for a business loan. A business loan, taken out at the right time, will take the pressure off you almost immediately as long as it is dealt with strategically and with other upcoming expenses in sight.
Consider whether a loan is plausible for your business. Do you have the funds at present to afford the repayments? Are your circumstances likely to change that will make it more difficult to make the repayments?
Keep this in mind before signing on the dotted line. Although a business loan will inevitably give your working capital a boost, it should be manageable for you and your business in the long run.
Looking for further advice?
If you’d like further advice on cash flow problems and solutions that could be right for your business, get in touch with the team at Anglo Scottish Asset Finance. With years of experience providing cash flow finance solutions for business across the UK, we could provide you with the right methods of solving cash flow problems, giving you the cash injection you need, at the right time.