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5 Strategies to Maintain Strong Cashflow in Challenging Times

Maintaining strong cashflow in your business is one those tasks more easily talked about than actually done. Especially in challenging times, cashflow management becomes not just a financial task, but a survival skill.  Everybody has a suggestion on how to manage your cashflow better, but not everybody is able to actually make it happen.

This said, here’s my five strategies to help keep your business afloat when the waters get rough:

1. Rigorous Budgeting and Forecasting

• Start with a detailed budget, mapping out expected income and expenses.  You have to know what sort of profit you can expect!
• Use cashflow forecasting  techniques to turn this profit forecast into a cash flow forecast.  Profit doesn’t always lead to positive cashflow – if your customers pay you slowly and you pay your suppliers quickly, then this is a recipe for a cash squeeze!
• Regularly review and adjust your budget and forecasts to stay aligned with your business’s changing circumstances.

2. Streamlining Receivables

• Speed up your sales invoicing process. The quicker you invoice, the quicker you can get paid.
• Implement policies for prompt payment, like early payment discounts or interest charges on late payments (carrot and stick!!)
• Consider electronic invoicing for faster processing.  Ideally, ask your accountant if you can invoice directly from your accounting system.  This saves time all round.

3. Prudent Expense Management

• Review all expenses and identify areas where you can cut costs without compromising quality or growth.
• Negotiate better terms with suppliers or explore alternative suppliers for cost savings.
• Avoid unnecessary expenditure and delay non-essential purchases.

4. Leveraging Technology for Cashflow Management

• Utilise financial management software for real-time visibility of your cash flow.
• Automate processes like invoicing, bill payments, and reconciliation to save time and reduce errors.
• Use predictive analytics to identify potential cashflow issues before they arise.
• On our social media platforms this week, we’ll be doing a post solely about the best tech options for managing your cashflow!  Watch those spaces for more!!

5. Building Strong Relationships with Financial Institutions

• Maintain a good relationship with your bank, or develop a new relationship with a finance broker.  These are contacts than can provide you with the firepower to grow, or alternatively bridge a tricky period for your business.
• Explore different financing options such as invoice factoring or asset-based finance to manage cash flow gaps.
• Stay informed about government grants, tax reliefs, or support programs that can provide financial breathing space.

Cashflow management can be the absolute measure of a business success.  We work with many business in sectors where customers pay on 60 day terms, but their main costs must be paid on end of month terms.  This is so prohibitive to cashflow that navigating this problem is the primary financial challenge.  We have used strategies including factoring facilities to help manage these challenges.

Conclusion

Navigating cashflow challenges requires a combination of strategic planning, efficient processes, and sometimes, creative solutions. By implementing these five strategies, you can build a more resilient financial foundation for your business, ready to withstand the ebbs and flows of the economic tides.

Remember, profit doesn’t equal cashflow.  Its entirely possible to have a wonderful profit and loss statement, but a cashflow nightmare!  Hopefully the strategies above will help you bridge the profit-cash gap.