“Cash is King” – What cash you have on a daily basis could determine the future of your company.

1. Cash Flow Reporting - understand your cash flow position now and for the next six months. You must have a robust and repeatable process for understanding your cash position. Sound financial reporting is essential and your accountant should have set up a process of reporting that allows you a regular, at least weekly, review of your cash position over the next weeks and months.
   
   
2. Review credit facilities - reporting and planning are vital elements for ensuring that your credit lines remain open to you. By ensuring that your reporting is robust and regular you will be able to respond to banks queries in a more timely fashion and will gain their confidence in your management ability and therefore business viability. If your cash position shows that you will need additional funds you will need to approach the bank with a Business Plan to demonstrate why you continue to be worth investing in as a business.
   
   
3. Invoice customers promptly – do not delay this element of administration because the sooner you invoice the sooner you will be paid. This should be the first administrative role you undertake daily. Some terms only start when the invoice is received by the customer. Check the terms and ensure that the start date is the invoice date or renegotiate at the very next opportunity.
   
   
4. Understand the true position of your debtors – money you are owed by your customers. What do they owe, when do they owe it? Resolve any disputed invoices and introduce a friendly but persistent system of reminder letters. Call or visit as necessary to collect any overdue amounts. All large amounts owed should be pre scheduled for payment and followed up if not paid in the agreed timescale.
   
   
5. Review credit status of all major customers - make sure your customers will remain in business: you should review all major customers to understand if their situation has changed. In the current climate they may also be facing cash shortages. Understanding the risks is a major first step in negating them. If they constantly promise payment but are not actually making them you need to negotiate a satisfactory outcome.
   
   
6. Negotiate regular payments - if possible as scheduled payments help you plan your cash position. Note that stage payments should be considered and negotiated for certain industry sectors.
   
   
7. Consider selling the debts to a third party - if you are aware that you do not have enough cash to meet all commitments in the short term, you could consider selling the debts to a third party, which is known as factoring the debt. This can be expensive and should therefore be used with caution.
   
   
8. Make only necessary payments to suppliers - We advocate prompt payment to suppliers where at all possible but early payments are unnecessary so use all credit that you have negotiated to the full.
   
9. Communicate with your suppliers and negotiate a revised payment plan - If you are aware that you do not have enough cash to meet all commitments in the short term, communicate with your suppliers. Most suppliers, if necessary and approached properly, will continue to supply you with goods and services if they understand your willingness to continue to repay debt and are aware of your plans to resolve the situation.
   
10. Consider accepting credit card payments – Depending on the type of industry this option will dramatically increase your cash flow and could be worth the cost of administering the card.

And finally...

Talk to us and we can discuss the above options with you. Most businesses fail due to a cash shortage but many could have survived with careful and appropriate planning.