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Stories Tagged ‘Cash Flow’

If you are looking to improve your business cash flow their are a few things that you can do and we will talk through these separately. In essence you are looking to speed up the flow of cash into the business while slowing down or eliminating the flow of cash out of the business. Let’s take a look at the different areas that can assist:

Credit control – if you are offering credit terms to your customers then it is important to ensure that you are paid on time. You have provided a good service or product and you are entitled to be paid. You have even been generous enough to offer credit terms so it is not asking a lot to be paid on time. Slow payers can have a real impact on the cash flow of your business. In reality if you are dealing with large organisations that have payment runs, etc.. it can be hard to dictate payment terms but you should still stay on top of it. Efficient credit control improves cash flow and importantly reduces the risk of bad debts.

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Cash Flow Finance

There are a few finance products that can be described as cash flow finance. These are typically invoice discounting, factoring, trade finance and overdraft facilities.

Overdraft facilities secured by way of a debenture have become almost impossible to obtain from banks without additional security. The reason for this relates to a legal case – Natwest v Spectrum Plus Ltd

Factoring and Invoice Discounting are often referred to as invoice finance.  These facilities are readily available to businesses that sell on credit terms to other businesses. Invoice Finance is provided by the high street banks and also an array of independent providers.

Trade Finance typically facilitates imports and exports. It can provide a valuable source of finance but can also protect both customer and supplier as it ensures that funds are released to the supplier but only when the right goods in the right quantity of the right quality are provided at an agreed point.

By combining trade finance and invoice finance if you have a confirmed order from a credit worthy customer you can fund the entire trade cycle right from customer order through to the customer paying.

It is also important to consider how else you can improve cashflow. Solutions include:

  • negotiate with debtors for quicker payment terms
  • effective credit control – can you improve systems or outsource this function
  • negotiate longer credit terms with suppliers
  • can you reschedule any loan agreements to reduce monthly payments?
  • sell any unused assets such as machinery and vehicles you don’t use
  • can you sub let and part of your premises?
  • can you reduce your wage bill?