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No Cash

Our business is really busy, but we have no cash!

And it’s keeping me awake at night.

The wages are due at the end of the week.

And the Vat bill is due.

But we have no cash!

Have you ever been in this position running your business?

You’re busy, working with great clients, winning profitable work.

But cash is tight, really tight and its been gradually getting worse.

Now its so bad you can’t sleep at night!

If your business really is profitable then the lack of cash normally comes down to one or more of:

Invoicing too late – do you wait until the end of the month before you invoice customers? Look at invoicing at least weekly or even better daily.

If you’re buying in materials for projects which will tie up cash, why not ask the client for a materials/mobilisation payment to cover this cost.

Wrong payment terms – do you offer 30 days as standard, or even worse 60 days!? This can be made worse if you’re paying suppliers in less than 30 days.

Look at changing your payment terms to 14 days. For a business turning over £50,000 a month, a change from customers paying in 14 days rather than 30 could result in a £25,000 cash flow improvement.

Buying too much stock – do you buy stock of materials, products, equipment in bulk to take advantage of discounts, only for this to starve the business of cash.

If you use £30,000 of materials a month, why not but £30,000 a month, rather than buying 3 months in advance to save 5% – £4,500. Only for your cash flow to be £55,500 worse off!

Work out what is more important – extra cash flow or extra profit.

Poor credit control – do you have a credit control function in your business?

Or do you just wait for customers to pay?

If you get into the habit of chasing customers for payment, this can include sending reminders for payment the week before its due, you’ll find your cash flow improves.

Lack of payment options – if customers only pay by cheque or bank transfer, look at introducing other options.

More and more business are using direct debit, GoCardless can be used by small businesses. Could this work for your business?

What about online payments and card terminals? Stripe and Worldpay could be just right for your business.

The options you provide for clients, the more it could help improve your bank balance!

Having enough money in the bank to pay the wages and suppliers, and to pay the tax bills when they are due gives us peace of mind and clarity which means we can enjoy work and our time away from work even more.

A #BBunker Blog by Telfords Accountants

If you’d like a free 30 minute meeting to discuss how we can help you run the business you want so you can have clarity and peace of mind, please get in touch.