Avoiding a cash-flow crisis

This post is by Giles Ellis, an experienced business coach and Director at GECA Chartered Accountants. GECA offer Business Planning and other Business Advisory Services.

10 ways to prevent cash flow problems in your business 

Your business doesn’t have to be tiny or struggling to experience cash-flow problems – in fact, periods of rapid growth can often trigger issues with cash liquidity. Left unchecked, cash-flow issues can slow growth and even take your business down.

If you’re having problems with cash flow now – or if you can see them on the horizon – there’s no one way to get your company back in balance. You need to identify what’s causing your cash-flow issues and try a few different strategies to get things back on track.

Here are 10 ways to get started:

1: Cost-cutting measures

Cutting costs is the most obvious way to boost cash flow in your business. And unlike raising revenue, it can have an immediate effect on your income flow. Where to cut costs depends on your business – you might be able to cut unnecessary expenses like business travel or company cars, put a freeze on overtime, or even reduce staff numbers to save on salaries.

2: Raising prices

Raising your prices is another simple way to increase cash flow – and you don’t need to implement a major price hike to make a difference. Even modest price increases can have a significant impact on your profits. If you’re nervous about losing customers through a price rise, consider offering deals on bundled products or services to offset the increases.

3: Check new customers

New customers are great for business – but only if they actually pay their invoices. Avoid issues and ensure cash flow by carrying out credit checks on all new clients. You should get a notification if the business or individual is in the habit of making late payments or defaulting on bills.

4: Tighten payment terms

You don’t have to give your clients months to pay their bills – in fact, a long payment term can be a major factor in cash-flow problems. If your payment term is set at 60 or 90 days, consider cutting it to 30 days to speed up your cash cycle.

5: Reward prompt payment

Prompt payment of invoices keeps cash flowing, so it should be incentivised. Offer a small discount for early payment, to encourage clients to get their invoices in as soon as possible. However, you may not want to offer this option on a permanent basis, as it could impact on your profit margin.

6: Invoice quickly, follow up regularly

You can’t demand prompt payment if you take months to issue an invoice. Keep things rolling by sending invoices as soon as the work is completed or the product is sent, and make sure to follow up on late payments. Every unpaid or late invoice is costing you money in goods and services – and damaging your cash flow.

7: Lease, don’t buy

Buying furniture, IT equipment, cars, property, and anything else you need to run your business is a huge expense. If you’re considering a new purchase, think about leasing instead – that way, you’re only making a small payment every month, which should help improve cash flow. Cancelling a lease is generally easier than on-selling if you need to downsize.

8: Think about invoice financing

A large, outstanding invoice can put a major dent in your cash flow. That’s where invoice financing comes in – some lenders offer quick, short-term loans based on outstanding invoices – ideal if you need instant access to cash. You’ll get up to 85% of the value of the invoice within 24 hours, then get the final 15% once your customer pays the invoice.

9: Look into loans

Short-term loans can help you bridge a cash-flow gap – whether from your usual bank, a non-bank lender, or alternative finance sources like peer-to-peer lending. You could also think about looking for longer-term funding from partners or investors if you’re often running into cash-flow problems.

10: Get help from the experts

Many cash-flow issues can be solved with quick-fix solutions, but if you’re finding yourself short more often than not, it might be time to get expert advice. Working with a finance expert can give you an outside perspective and help you find new ways to generate cash for your business.

You could bring in a business accountant or part-time CFO to help you sort your finances long-term – creating financial forecasts, reviewing your expenses and income, and helping you find innovative ways to boost your cash flow. They can also help with decisions around spending, hiring, and pricing your product or service. It’s about getting an objective outside view of your business – with years of experience behind it.

Read one of our other blogs for further information on how to combat cash flow problems.

Need expert help with your cash flow problems? Get in touch with GECA today.

The post Issues With Cash Flow? Here’s How to Solve Them appeared first on GECA Chartered Accountants.

Lifting your business to the next level

If you’re a small-to-medium business, the thought of hiring a CFO, even part-time, may sound excessive – aren’t they for big corporations? Would you have enough for them to do? 

But if your business is entering a period of rapid growth, a part-time CFO could be exactly what you need. After all, if you’re trying to move up to the next level in business, who better to talk to than someone who’s already been there? 

Having access to an expert with experience in bigger, more established companies can help you make the right decisions and avoid expensive mistakes. They can provide everything from operational support to in-depth strategic analysis and can find new ways to move your business forward.  

Bringing on a CFO part-time means you get access to high-level finance expertise when you need it, without paying an unnecessary full-time salary. 

More than just accounting services 

These days, CFOs offer far more than simple bookkeeping or accounting services. They deliver invaluable strategic analysis. This can have a huge impact on your performance, profitability, and long-term business success. 

When you hire a part-time CFO, the scope of duties will depend on the size of your business, your specific needs, the industry you’re working in, and your overall business strategy. Generally, they will work to shape your company’s finance strategy and provide day-to-day support for your financial operations. 

A CFO should also be able to help with business planning and forecasting, tax planning, risk management, compliance, auditing and reporting, investment, working capital management, and general budgeting. 

As an experienced finance expert, your CFO will act as your company representative and help you communicate and negotiate with lenders, investors, and auditors more effectively. They may work with your board of directors to hammer out financial details. They’ll be in the ideal position to offer advice and guidance around any business decisions – mergers, sales, acquisitions, or any other major changes.

A new perspective 

A good part-time CFO isn’t there to simply tick the finance box and go along with every idea the CEO comes up with. They act as more of a strategic partner to the CEO or business owner, using insight and perspective to identify opportunities and offer solutions. 

When you’re running a business, it’s easy to get bogged down in the day-to-day, so an outside perspective can be incredibly valuable. A good part-time CFO will act as a sounding board for your questions and problems, but should also be able to spot issues, boost efficiency, and identify opportunities that you may not have considered. As money experts, they’re the most likely to notice when your strategy isn’t on a firm financial footing and should be able to help you shift your vision to match your financial reality. 

Even though your part-time CFO wouldn’t be working in your business every day, they should be able to offer their own expert opinions on company decisions. More importantly, they can speak up if they disagree. It’s not about negativity, it’s about challenging assumptions and pushing your business forward. 

Face challenges with a part-time CFO

Growth is positive, but it can also mean rapid change and serious business challenges. If you’re struggling to keep up, working with a part-time CFO can help make sure you make the right decisions and avoid financial pitfalls. 

Need help navigating your business through a growth period? Talk to the team at GECA about our part-time CFO services. 

The post What to expect from a part-time CFO appeared first on GECA Chartered Accountants.