Cash Flow Management

Issues

Strong cash reserves are the lifeline for any business and the potential of running out of cash will create unwanted stress and challenges. It may also result in the need to manage cash on a daily basis. Cash flow difficulties can arise from a multitude of scenarios which include the loss of a key customer, bad debts, increased supplier prices, trading losses, or factors outside of the business’s control.

Implications

Most businesses will face cash flow difficulties at some point in their lifecycle, and by not taking a proactive approach, there is a risk that you may be unable to meet future payroll, debt service or supplier payments. This may result in the loss of control and an increased risk of business failure.

Next Steps

It is key to act quickly once you identify cash pressure to ensure that you maximize the options available to your business and to mitigate against a cash requirement. This will stabilise cash flow while you seek to resolve the underlying problems. Taking no action should not be an option.

It is imperative that you accurately assess your business’s future cash position to determine the timing of potential pinch points in order to determine the time and options available.

Options may include:

  • Active engagement with key suppliers and lenders to avoid enforcement and legal action and prioritize cash demands

  • Seeking payment plans with parties such as key creditors, lenders and HMRC to agree to repay arrears over a period of time and generate cash headroom

  • Seeking extended debt facilities from either your existing lender or approaching new lenders/equity providers for additional capital

  • Improving cash by reducing stock levels, agreeing extended payment terms with key suppliers, and recovering old and bad debts

There are a number of options available to your business, and we work with a number of companies to assist in stabilizing cash and mitigating cash requirements.

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