The challenge of cashflow for UK businesses
By Mr Bankruptcy
21st November 2022
Cashflow is vital for the survival of every business but as the financial squeeze continues to tighten, cashflow is likely to be impacted. Businesses need to plan for that situation now.
What’s happening with cashflow?
Research from Barclays showed that 58% of SMEs and 94% of medium-sized enterprises are waiting for late payments from customers as they themselves are also feeling the impact of changing economic circumstances. This has a significant impact on business; according to a recent report by Xero, Crunch: Cashflow challenges facing small businesses, late payments cost small businesses in the UK £684 million a year.
Why is cashflow important?
Cashflow, or the amount of money moving into and out of a business, needs to be managed because it directly impacts on the success of an enterprise. If you don’t get the balance right between the rate of money coming in and going out, you will find yourself in a position where your business isn’t able to pay the bills or continue to invest in the future.
And as inflation rises and costs continue to increase, more and more people are spending less, causing real concerns regarding recession and indebtedness.
What can businesses do to manage cashflow?
Businesses need to ensure they don’t find themselves in negative cashflow, where the amount of money spent is greater than the amount coming in. As this is more likely to occur during challenging economic circumstances, businesses need to take tighter control of their cashflow with some important actions:
- Look for opportunities to reduce expenses so you spend less.
- Ensure that clients pay invoices on time. Set clear deadlines when you expect invoices to be paid so you know when money is coming in.
- Complete regular cashflow forecasts and cashflow statements to understand the income that will be generated and the costs you expect to pay, so that you can identify periods of potential negative cashflow.
- Manage your costs and chase invoices accordingly.
- Look for opportunities to renegotiate agreements to cuts costs and build a more steady income flow.
- Build up reserves of cash to tide you over unexpected costs or loss of income.
- Look for opportunities to evolve your products along with changing markets and ways to adapt when demand for existing products or services declines.
Keeping control of cashflow helps you to spot problems on the horizon earlier enough to give you time to make adjustments and mitigate against the effects. Cashflow is the lifeblood of a business, so keeping control of it will extend your business’s lifeline.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors. With a supportive and friendly approach, we offer a full range of advice and professional services to individuals and business owners/directors who face cashflow problems leading to unmanageable debt, or who are involved in civil or commercial disputes. Our services include:
We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.
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Please be advised that all views expressed in these posts are those of the author and not of James Rosa Associates ltd.