Ease your cashflow

By LBV

27 Oct 2009

One of the most common reasons why a business fails is due to poor cashflow management. Many profitable businesses run into difficulties because they don’t address cashflow issues or have sufficient plans in place to balance income and expenditure.

Recent research conducted by NatWest shows that almost 40% of small and medium sized companies have no cash management strategy in place and almost a third (29%) take no action at all to ease their cashflow issues.

To help businesses manage their cashflow more efficiently, NatWest and RBS have created a practical guide which provides key tools to enable businesses monitor this issue.

The guide, which is available from www.natwest.com and www.rbs.com, also contains information on what constitutes a viable business and an insight into what kind of information the bank would expect businesses to prepare when they are looking to secure funding.

There are several practical steps a business can take to continue trading successfully during the current economic downturn.

These include:
Cash is king – keep control of your cashflow by having the right management information and systems in place. They’ll allow you to act on warning signs before they become a problem. Remember, Invoice Finance may be an answer to working capital problems.

Talk with your professional advisors – there is a world of support available to small businesses via organisations such as the local Chamber of Commerce, Business Link and the North West Development Agency.

Get paid – you must set clear terms of business and collect debts promptly. If you’re worried about being paid, then consider stage payments or even cash on delivery to reduce your risk of bad debts

Look at your costs – as sales fall, avoid taking on unprofitable business. Cutting your costs can provide you with the scope to reduce prices. If you take on big orders, you could be overlooking your smaller more profitable customers

Spread the risk – don’t just rely on one or two customers. In an economic downturn, all it takes is for one of your customers to move to a cheaper supplier and your business is no longer viable. In past recessions, those that suffered were those that failed to go out and get new customers and those that succeeded were the ones that did.

Lee Richardson is the director of business and commercial banking for NatWest in Preston
 

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