You've no doubt heard the phrase 'turnover is vanity, profit is sanity, but cash flow is king!'. Wise words for anybody that is running a business, but good cash flow control is absolutely vital for a rapidly growing business. Financial problems can severely limit or even stop the growth of a business, and 'overtrading' can cause similarly grave issues.
Effective management of your company finances should be a key part of the business planning process, and be continually monitored and assessed when exploring new opportunities. Certain opportunities may seemingly be 'too good to miss', but taking essential funding away from your core business to pursue these may have a damaging or even irreparable effect if appropriate funding solutions are not in place.
Good cash flow management - the basics
There are some basic principles that growing businesses should consider to aid their cash flow.
- Effective cash flow management is vital - carefully controlling every element of working capital helps to maximise the cash available in your business. This includes keeping tight control on overdue debts, efficient stock, supplier and inventory management, looking at 'just-in-time' delivery solutions and more. Planning ahead is key, and effective cash flow forecasting will help you to foresee shortfalls and act accordingly.
- Accessing any 'hidden cash' within your business - might you be eligible for any of the Innovation Incentives that are available to many growing companies in the UK? Click here to see if any of these apply to your business as accessing this money may provide the additional cash that your business requires.
Invoice finance solutions
Invoice finance can be an effective solution to free up cash in your business. It can be seen as an 'advance' against your outstanding customer invoices. Using a very simple scenario - you need £20,000 of available funds to take on a new project for client A, and you just invoiced client B for £50,000 which is due for payment in 30 days time. Invoice finance enables you to access a portion of the £50,000 due in from client B before they actually pay it, and therefore undertake the new project for client A. There are a number of options available depending on your specific requirements, including:
- Selective invoice discounting - Giving you access to funds against specific invoices from a single or handful of debtors. This can be a good option for businesses with occasional cash flow needs.
- Confidential invoice discounting - Giving you access to funds against all of your outstanding invoices; ideal when you have ongoing cash flow needs.
- Contract finance - Businesses that are looking for recurring revenue upfront can get access to funds against contracts, licences and retainers.
With cash flow being so vital to growing businesses, and so many options being available it is vital that you get the right cash flow solutions to suit your business.
Contact us today and we'll arrange a free consultation with an expert advisor who can discuss the options available to you with no obligation.