It is widely reported that businesses are finding trading challenging with reduced working capital and access to cash placing even more of a strain. In the good times, it was easier for businesses to be more self financing and for external finance to be raised, this however does not seem to be the case today.
So what can a business do to improve cashflow? The good news is that there is no need, yet, to resort to putting your hands down the back of the sofa.
Focus on more profitable areas including customers, products or services
By identifying the more profitable areas of your business and concentrating on these as opposed the less profitable or loss making areas it is possible to improve the overall cash position.
Tighten up on credit control and avoid bad debts
If you offer credit, it might be a good time to look not only at checking the credit worthiness of your existing and new customers, but also adopting a more rigorous debt collection process. Remember, a sale is a gift until it is paid for.
Reviewing your remuneration
Unfortunately, it may be necessary to consider reducing the amount you take out the business. It may however be possible, with advice on remuneration planning, to maintain or even increase your drawings without affecting the burden on cash.
Review your stock levels
Often cash is tied up in slow moving, even obsolete stock. A review of your stock inventory and approach to stock levels can be a very effective way of releasing cash back in to the business.
Take credit where credit is due
If you haven’t reviewed terms with your suppliers, it might be good time to negotiate new and more favourable terms.
Reviewing your funding structure
Most businesses still tend to rely on overdraft and loans for finance, there are however a growing number of funding options available. A review of other funding streams, even use of business angels, helps to leverage additional working capital.
Maximise the tax reliefs available
Often without specialist advice businesses can find they have paid more tax than they may have needed to. A review of overall tax burdens and thought to the tax reliefs available can be a very effective way of helping to inject cash into a business.
These are just few ideas on how a business can generate cash and improve its overall position. For further ideas it is undoubtedly worth seeking the advice your accountant and tax advisers.
