Feeling the pinch?
Why keeping on top of your cash flow is so important
For many SMEs, the last couple of years have been a huge challenge in terms of cash flow. The changing landscape of Government bailouts and moving goalposts of when life might return to normal have created huge difficulties for SMEs, and many have relied on government support to get through this period.
Many SMEs are now seeing the light at the end of the tunnel. However, businesses must not become complacent. As government support schemes come to an end, the uncomfortable truth is that there will be more tough times ahead, especially with rising fuel and energy costs.
Faced with this reality, it’s crucial that businesses monitor the potential cash flow challenges over the coming year and consider the options available to navigate these possible difficulties. During the pandemic years many businesses have been forced to continue paying certain fixed costs, dwindling away important working capital. Cash may also be tied up in unpaid debt – something to be aware of when facing cash flow challenges over the coming months.
1. Make better plans and decisions
With an accurate cash flow statement, you’ll know the exact amount of funds you have available at any given moment. This is vital because any plans and decisions you make must be supported by accurate information. If you don’t manage your cash flow carefully, you could make ill-informed decisions that put your business at risk.
You may feel as though your business is in a strong position, but a cash flow statement could show that there isn’t much money coming into the business that particular month. This could be because you haven’t issued invoices to clients. Whatever the reason, with an updated cash flow statement, you’ll know not to make any significant purchases at that time.
2. Understand where you’re spending money
Manage your cash flow effectively and you’ll gain a better understanding of where you’re currently spending your money, something that’s not on a profit and loss statement. It’s important to know exactly where the money you spend is going and why.
It isn’t always easy to see expenditures in black and white, which is why it’s so important to effectively manage your cash flow. You might be able to identify areas of the business where you can cut costs.
3. Protect business relationships
If you’re having cash flow problems, then you may not have the funds available to pay your suppliers. This can harm the business relationship you have with them and damage your overall reputation.
Set payment schedules to ensure you have the finances available to pay suppliers. It’s vital you do advanced planning, so you don’t face multiple invoices or bills all at the same time without the funds to deal with them.
4. Expand at the right time
Growing and expanding your business is exciting. It means new markets, new staff members and more revenue. But a word of caution. Expand at the wrong time or in the wrong way and you’re more likely to have issues in the long-term.
Growth requires a lot of cash. Purchasing vehicles, renting buildings, hiring employees, and acquiring computers all takes place before the money starts coming in. If you don’t have the funds available to match your growth, then you’re going to run into problems. Manage your cash flow effectively and you’ll know when the time is right.
A recent survey by the Department of Business, Energy and Industrial Strategy revealed 24% of UK businesses cite late payments as a real threat to their survival. This is the highest level across Europe. Provide you and your business with peace of mind by taking action with the right tools.
5. “Profitable” businesses can go bankrupt
It’s important to understand cash flow vs. profit. Just because customers have provided you with plenty of work doesn’t mean you can pay your bills.
You might complete what appears to be an attractive contract, but your customer’s payment terms might be 60 days. Not only do you have to finance your costs for that particular contract, but you also need to finance other ongoing work too. Unless you have access to cash your business might run out of cash and be unable to pay its employees and its other creditors. Even if you can eventually pay your bills by asking creditors for more time, poor cash flow could result in you losing vendors, suppliers, and lenders, which can severely damage your business. This is one of the reasons why small-business owners should have a cash flow management system.
The profit and loss account might look healthy, but no business can function without cash being available. The records are full of highly profitable businesses that have gone bankrupt. Cash flow issues are the biggest cause of business failure.
A solution to the problem
Invoice finance for hauliers is becoming increasingly important. This is because the main two burdens for young and growing haulage companies are cash flow and administration.
They need quick and simple methods to improve their cash flow. PMD Business Finance are aware of how important it is to make sure that your drivers and staff are paid on time and those escalating fuel bills are met even when your clients haven’t yet paid you.
Invoice Finance is the perfect fit for any haulage business. It can fill the cash flow hole by advancing up to 95% of the value of the outstanding invoice once it has been issued to the client. Once the client has paid in full, the remaining 5% will be paid to you.
PMD Business Finance can help
PMD Business Finance know the importance of always having a steady cash flow available to keep haulage businesses and their vehicles moving; we work with you and make finding an Invoice Finance facility as easy as possible. A secure credit facility provides you with an effective solution speeding up the order-to-payment chain. This ensures drivers can be paid, goods can be moved, and vehicles can be refuelled. With years of experience working with transport businesses and our diverse panel of funders, we make it easy for you to find the right lender for your business.
We take the time to understand where the pressure points lie within your business and work with you to find the most suitable lender for you.
We will –
- Set up meetings with a small number of lenders we feel are right for you
- Compare and contrast the offers each funder puts forward
- Sit down with you to decide which offer works best for you
- Hold your hand throughout all the due diligence phase undertaken by the lender
- Liaise with yourself and the lender to make sure the activation of the facility runs smoothly
- Stay in touch with you once the facility is live to make sure it goes on to support you in the future
PMD Business Finance is the largest Independent Finance Brokerage in the UK. Currently in our 13th year, we have over 150 lenders on our panel across Asset Finance, Invoice Finance, Loans, Asset Refinance and Property Finance. We have invested heavily in our staff and infrastructure meaning that we have industry experts in each sector.
If you would like to speak with one of our team then please don’t hesitate to contact Mark Millhouse, our head of Invoice Finance today on 07711 594030.
For more information on the services and finance options that we provide, please click here. Alternatively, keep up to date on what we’re up to and for new opportunities within our growing team by following us on LinkedIn.