COMPANY INSOLVENCY ADVICE
Cash Flow Problems
Many businesses experience cash flow problems. Solutions must address the cause of the problem. Our team can advise you on viable options to rescue your company.
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cash flow problems
How we can help with Cash Flow Problems
If your business does not have enough cash to pay its debts, you must act quickly. With expert guidance, you may be able to resolve cash flow problems before things get worse.
✓ Discuss your company’s finances and structure to find the causes of cash flow problems
✓ Explain viable solutions that can help your business to recover from financial struggles
✓ Provide confidential advice about your options to inform your decisions
✓ Relieve the stress of business debts by creating a plan to move forward
How Can I Identify And Resolve A Cash Flow Problem In My Business?
Positive cash flow is the lifeblood of a successful business. While the value of your company’s assets, its balance sheet and its annual profit performance are all vital measures of its health, cash flow determines your ability to pay debts on time, invest and grow.
If your business does not have sufficient cash to pay its ongoing operating costs, it can be difficult to see the way forward. If you can’t pay bills, rent, taxes or invoices from suppliers, these challenges can quickly mount up, and if you don’t work towards a resolution as soon as you notice or anticipate the problem, you might have to face much more serious problems.
Thankfully, the sooner you act, the more options you will have available that can solve cash flow problems. You may be able to negotiate with creditors or with HMRC for more time to pay, or make other practical changes to your business to improve the financial situation. The team at Company Insolvency Advice can provide a range of services to help your business understand the causes of your problems and the solutions that are available to address them.Below, we have explained some of the most common causes of poor cash flow, and outlined some possible steps you can take. However, if you need bespoke advice tailored to your business’ individual circumstances, get in touch with our expert team today to learn how we can help. Call us on 0800 999 0666, or use our online enquiry form to request a call back.
There are many reasons why businesses experience cash flow problems. Often, these are perfectly viable businesses experiencing temporary hardships, and there are many possible solutions that can help to resolve this. With many years of experience supporting businesses through these types of challenges, the team at Company Insolvency Advice can confidentially discuss your financial situation, understand the difficulties you are facing, and guide you towards the most suitable solution. We have seen many businesses recover from cash flow issues – we can advise you of every option that is available to you and help you to understand how you can move forward.
If your company has underlying structural or procedural problems that need to be resolved, we can help to identify the causes of your company cash flow problems and provide targeted advice. In any of these situations, it is important to act as quickly as possible. Sometimes, it is tempting to think that a successful month or a big sale will be enough to resolve your problems – however, it is better to have a practical, realistic plan to follow instead of leaving things to chance.
You should act immediately if you think your business is at risk from poor cash flow. Call us today, or use our online enquiry form to request a call back, for dedicated, practical and confidential advice on how your business can pay its debts.
There are many different reasons why businesses face challenges with cash flow. Some of the most common causes of cash flow problems in a business are listed below:
- Delayed receivables: If customers are slow to pay invoices, the business may not have enough cash on hand to cover expenses while you wait for late payments to come in.
- High overhead costs: Excessive overhead or operational costs can deplete cash reserves.
- Low profit margins: If the cost of goods sold is too high or prices are too low, profits may not provide sufficient cash flow.
- Poor financial planning: Lack of a solid budget or financial plan can lead to overspending and cash shortages.
- Unexpected expenses: Emergencies or unforeseen costs can disrupt the cash flow if there is no contingency plan in place. Large, unexpected tax liabilities can also significantly impact cash reserves
- Rapid growth: While growth is positive, it can also cause cash flow problems if the rate of expansion outpaces the available cash.
- Seasonal demand: Businesses with seasonal peaks may experience cash flow problems during off-peak times.
- Credit terms: Offering credit terms to customers that are too lenient can lead to a delay in cash inflows.
- Poor credit management: Inability to obtain credit or poor management of credit lines can also lead to cash flow issues.
- Dependence on a few big clients: Relying on a small number of clients for a large portion of revenue can lead to cash flow problems if one or more clients delay payment or reduce orders.
- Loan repayments: Large debt repayments can consume a significant portion of cash flow.
- Holding too much stock: Over investment in inventory ties up cash that could be used for other operational needs.
Below, we will provide more detail about some of the most common causes of cash flow problems, and those that can present the biggest hurdles for company directors. If your business needs advice on any of the circumstances listed above, or is experiencing cash flow challenges caused by something else, contact the team at Company Insolvency Advice today for bespoke guidance based on your situation.
Generous Payment Terms for Customers
If your business is not bringing in cash quickly enough to meet your outgoings, it may be because you are not holding your debtors to the same payment terms you have agreed with your creditors. Offering generous payment terms can help you to build relationships with customers, but you need to be realistic and implement an effective credit management policy to prevent cash flow problems from arising.
Giving your customers large amounts of credit and taking a passive approach to collecting your debts can delay cash coming into the business, but you will not receive the same leniency when there are bills to pay.
By credit-checking new and existing customers, closely managing customer credit accounts and acting swiftly to recover outstanding debts, you can reduce the likelihood of late payers affecting your own company’s cash flow.
Loss of a Key Customer
Losing a large or important customer can be a serious problem for many businesses. If you have a small customer base or rely on a few key accounts for a majority of your business, this can be devastating – it removes a considerable proportion of your cash inflow, and if the customer has encountered financial difficulties or gone out of business, they may not return.
It can take some time to recover from this type of setback and many small businesses fail for exactly this reason. If you find that you are struggling financially as a result of this type of challenge, there are actions you can take that will buy your business time to bring in new customers, or to restructure to account for this lost income. For example, if you cannot pay the taxes you owe, consider applying for a Time to Pay Arrangement from HMRC, which can let you pay in instalments, prevent late payment fees, and give you more time to decide how your company will move forward.
Lack of Oversight of Company Finances
Directors should be aware of the financial position of their company at all times, which is only possible with accurate bookkeeping and accounting, and fast access to financial reports and figures. Otherwise, directors may not be aware that their company is facing cash flow problems until they become more serious and more difficult to resolve.
Using up-to-date accounting software can help to resolve this problem. The right software package can offer real-time access to the latest financial information and customised reporting based on the metrics that are most useful to your business. Detailed sales and cash flow reports, as well as regular cash flow analyses, can allow directors to act as soon as they notice the symptoms of a cash flow problem. This may also help to identify the source of the problem.
If your company is struggling with cash flow, there are many simple solutions you might consider to help resolve these challenges in the short term and improve your company’s financial prospects in the future. Some of these simple changes can help you to avoid cash flow problems in the future, while others are more short-term fixes. You may need a combination of these approaches to overcome cash flow challenges for good.
- Reduce credit terms for your customers to collect cash sooner
- Establish a comprehensive credit control procedure within your company. This could include:
- implementing credit checks on customers;
- setting limits on how much credit customers can receive;
- developing proactive payment-chasing procedures; and
- exploring legal mechanisms to collect money that is owed to your company
- Charge interest on late invoice payments
- Request longer payment terms from your suppliers to reduce the gap between cash inflow and outflow
- Compare rates from utilities companies, suppliers, company vehicle providers and others to ensure your business pays the lowest possible rates
- Improve efficiency to increase sales and profitability
- Investigate ways to attract new customers
- Reduce stock levels
- Use invoice factoring and invoice discounting to provide an immediate cash injection, under suitable circumstances
- Consider other forms of business finance, such as asset finance, to extract cash from assets
While business loans and financing may not be a viable option in all circumstances, a cash flow forecast can help you determine whether more money from investors will solve cash flow problems or make them worse. The team at Company Insolvency Advice has a wealth of experience in helping organisations with cash flow forecasts, and we can advise you on the financing options that can help you to avoid business failure.
If you are certain that business finance will be the most viable way to resolve your cash flow challenges, there are several methods you might consider to raise extra funds. Choosing the best course of action will require a thorough understanding of the causes of your financial difficulties, as each approach has different advantages and disadvantages that may make it especially viable for your business. It is important to research these options thoroughly, or speak to an expert before making a decision to avoid choosing an unsuitable solution.
Bank Loans and Overdrafts
Thanks to our experience in supporting organisations through cash flow difficulties and company rescue procedures, we have a clear understanding of the circumstances under which borrowing might be suitable for you. We have built relationships with a range of high-street lenders, specialist commercial banks and other financial institutions, which means that we are well-placed to advise you in seeking business loans.
Crowdfunding Lenders
Crowdfunding is a relatively new type of loan structure in which a business pitches to a large group of investors. Each individual investor contributes a small amount into a fund managed by a crowdfunding platform to support your business to achieve a specific goal or project. Depending on the structure of the fund, investors may receive equity in the business, repayment of their investment with interest, or other rewards in exchange for their investment.
While the risk is spread over many investors, you borrow from a controlling source – the platform itself – which has several benefits. However, there are many financial implications to consider and crowdfunding is not suitable for every business, so it is important to seek expert guidance to determine whether or not this is appropriate for your circumstances.
Asset Finance
You may be able to raise money by using a key asset (such as property, or a piece of equipment) as security for a loan. This enables you to unlock cash from an existing asset, but there is always risk involved in borrowing more money to recover from debt challenges. Speak to our experts to learn whether this approach will work for your business.
Hire Purchase and Leasing
If your business’s cash flow challenges are preventing you from investing in the equipment your business needs to operate, consider whether hire purchase or leasing might be suitable. This is a way to pay for plant and large equipment in instalments, which can free up more of your resources for use as a cash flow reserve or other financial buffer.
Private Investment
Viable businesses may be able to attract investor capital, although this can be a complicated process without the necessary experience. Typically, it is best to work with an expert commercial advisor who can attract investors and help guide the company towards the most financially viable course of action. With many years in finance in the UK, Company Insolvency Advice’s team is often called on to support businesses in generating new investment.
Finance may not always be the best way to overcome cash flow problems. It can offer a short-term injection of cash that can resolve some of the pressure, but your company may need a longer-term strategy to ensure that further problems do not arise. You may see more success by updating your internal credit control procedures, applying for a Company Voluntary Arrangement, or investigating other company rescue solutions.
To get the best possible result for your business, it is vital to seek professional advice the moment that you notice that your company is facing cash flow problems. Company Insolvency Advice can provide guidance to help you find the most viable solution to recover your company, and support you throughout the process, including by helping to explore finance options and secure new investment.
No business runs smoothly all the time and there are lots of different reasons that cash flow problems can arise to disrupt your operations. This may happen because of decisions you have made about how you run your business – such as how you manage customer credit and how much stock you hold – but can also be affected by factors outside your control, including changes in market conditions or an increase in competition.
The best way to relieve stress and deal with the challenges of cash flow problems is to speak to an expert. The team at Company Insolvency Advice can examine your circumstances and help to identify the causes of cash flow problems. From there, it can often be relatively straightforward to implement solutions that may have a chance of restoring your company to a strong financial position.
We’ll provide detailed advice on the outcomes you can expect based on the specifics of your position, which can help to relieve the stress that arises when you face the unknown. All our calls are confidential, and we can help guide you to a suitable solution that gets your life back on track and your business in the best possible position to succeed.
If you are feeling pressure from creditors, there may also be solutions you can implement to remove this pressure and begin to rectify the situation. Call us at the earliest opportunity to learn about the solutions that may be available to you.
If you are struggling with business cash flow problems, you should seek expert advice as soon as possible. The team at Company Insolvency Advice can offer guidance on a range of business finance options and other solutions to help your business recover from cash flow problems. The sooner you act, the more options will be available to you and the better chance you will have of seeing your business recover and flourish.
If you do not take action to improve cash flow problems quickly, there can be serious consequences for your business – including the need to pay late payment fees or interest to creditors, and other things that can make business recovery more difficult.
Contact us today for a confidential discussion about your business’ financial situation and the steps you can take to resolve cash flow problems and get back on track. Call us on 0800 999 0666, or fill in our online enquiry form to arrange a call back at your convenience.
More Advice And Guidance On Business Cash Flow Problems
If your business is experiencing cash flow problems, it is best to get expert advice from an insolvency practitioner straight away. As experienced insolvency practitioners, we can offer advice and guidance on a range of business finance options and other solutions to cash flow problems.
If you do not take action to improve cash flow problems, the situation can worsen and result in business insolvency. You can contact us at any time via telephone, email or online live chat to get the help and assistance that you need.
Get free, immediate help today
By submitting this form, I give Company Insolvency Advice permission to contact me. More information can be found in our privacy policy here
Director Advice Line: 0800 999 0666
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Company Insolvency Advice is a leading business rescue, corporate restructuring and insolvency specialists, with years of experience in providing corporate debt solutions. We understand the daily pressure you are under as a director and our team of expert consultants cover the whole of the country in order to discuss debt solutions with company directors.
The first port of call should be to consult with a licensed insolvency practitioner to discuss your options. Thankfully, you can arrange a free initial consultation with one of our local insolvency practitioners at your convenience.
Get in touch with us today on 0800 999 0666 or fill out our online enquiry form.
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