What to do when your business is struggling with cashflow

Cashflow – the total amount of money coming in and going out – is vital to your business. It can be a difficult concept to follow, mostly because your cashflow doesn’t actually show much money you have or how profitable you are as a company. If all of your wealth is tied up in sales stock or other assets, your cashflow is going to be relatively low. Fortunately, there are a couple of things you can do to make things easier business is struggling with cashflow.

Consider a business loan

As long as you have a decent credit score there are many banks that will offer you a business loan. Your business also has other avenues of securing a loan, just as one example, you could start looking into warehouse lines of credit when searching for loan offers. This sudden boost of cash will increase your cash flow, but will obviously come with the downside of having interest on the repayments. Unfortunately many businesses which have been struggling with cashflow for a while may not have a credit score which allows them to take out a significant enough loan. If this is the case, don’t worry – there are still ways to help your situation.

Consider debt collection

Late paying customers and clients are the bane of every business. If you’re an SME it could be that you have a client who’s good for the cash, but simply cannot manage their payments in a timely manner. On the other hand you could have customers who simply don’t pay, either because they refuse or because they simply can’t. If this is the case, finding the best debt collection agency to help you is often the way forward. If this is a regular problem, or if you’re looking at signing exceptionally large deal, it may be worth credit checking the client – if they’re above board they shouldn’t have a problem with this.

Sell off stock

In the world of sales any stock you can’t budge eats a hole in your profits. You have to pay to house what you can’t sell, and the money tied up in stock is money which isn’t part of your cashflow. If you find that you have stock you can’t move, it may be worth selling it back to the supplier, or dropping the price so that you can at least get it moving out of the warehouse.

Cut your overheads

Cutting overhead costs is one of the key ways you can reduce your expenses and boost your cashflow. Some of these can be fairly easy, such as spending less on petty cash, switching to more energy efficient lighting or office kitchen appliances, though these are relatively small in the grand scheme of things. Your office rent and your staffing costs are almost always going to be your two biggest expenses, and your two options here are moving to a smaller office or slimming down to a smaller team. Neither of these are particularly pleasant options, but they can be a life-saver during hard times. Flexibility is important if you want your business to come out of any financial problems unscarred.

Look into debt consolidation

Low cashflow means that you’re going to struggle to pay your debts, no matter how profitable your company may be. When all else fails, debt consolidation can be one of the options which saves your company from going bankrupt. Company Voluntary Arrangements (CVAs) are one of your debt consolidation options, allowing you to repay all your creditors in fixed monthly instalments. While this can do great things for your cashflow, it is a form of insolvency, and so shouldn’t be entered into lightly. Make sure you seek qualified professional advice before entering into any formal debt relief options.

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