How to Improve Cashflow in Your Business

Running a business has gotten a lot harder for leaders in recent years, whether heading a new start-up or a globally-recognised multinational firm. The impacts of Brexit on trade in the UK have led to unprecedented hikes in the price of wholesale supply, and fresh barriers to export trade. Meanwhile, rising inflation places downward pressure on consumer spending, leading to an impending recession that is predicted to be the longest in the UK’s economic history.

Altogether, these factors make for dark times for the average business. As GDP threatens to shrink, so too does the liquidity of many businesses. Cashflow is one of the more important metrics by which investors and stakeholders follow the success of businesses; rising costs and falling profits are the perfect breeding ground for negative cashflow and nervous stakeholders. What might your business do to improve cashflow in such difficult times as these?

Reduce Outgoing Expenses

Poor cashflow essentially describes a discrepancy between your business’ income and outgoings. As such, your immediate attempts to rectify any troubling cashflow figures will relate directly to one of these two figures. The very first area you should look is your outgoing; are there any ways in which your monthly business expenses can be reduced?

There are a few approaches to take here, with varying degrees of immediacy. Brokering cheaper deals with new suppliers might stretch into the medium term, but can be a relatively swift way to get regular costs under control. You might also freeze any recruitment drives you have underway, halting costs incurred by third party recruiters and creating room in your future budgets.

Chase Payments from Clients

The other side of the coin is the money you bring in each month. Increasing your business’ income is not the preserve of crisis management or prevention, but rather the point of developing your business. As such, conventional means of generating income are not necessarily going to cut the mustard when addressing cashflow.

With this in mind, your first port of call should be your clients. You may allow some of your more long-standing clients generous terms of credit, up to 90 days if they purchase regularly. In the short term, you might petition that your clients agree to shorter repayment terms in order to boost your income for one or two months.

You might also have clients struggling with their own finances at present, and having difficulties repaying on your terms. In these unique situations, you may be able to work with restructuring lawyers in helping that company configure a helpful repayment schedule.

Restructure Finances

Of course, you may also have some short-to-medium term success engaging with the root cause of your poor cashflow – which isn’t always far removed from your own finances. There are cases where a company, despite exploding profits, is still experiencing negative cashflow due to their own debts and credit liabilities. If you re-invest your income into expansion, that has negative consequences for cashflow. Working with your finance team, you may be able to shift your credit liabilities around and improve your outlook.