Business Cashflow - The Perfect Storm

Businesses are facing the perfect storm when it comes to cashflow.

Customers are paying slower. Suppliers are tightening up on credit limits and payment terms. Supply chain disruption means that business are sinking more cash in to stock. Prices are rising.

This is on the backdrop of Covid loan repayments kicking in and deferred payments to HMRC needing to be repaid.

Sadly, these issues are compounded further. The rising base rates mean that the cot of funding is increasing. The perceived risk in the market means that asset valuations are dropping and the loan to value that lenders are willing to provide is falling.

Lenders are looking for increased security, higher pricing and lower exposure against the assets that businesses put forward as security.

So what can businesses do?

Businesses need to ensure they stick to basics in terms of managing cash flow.

• Raise invoices as soon as work is completed
• Make sure you have a valid audit trail to support invoices so any disputes can be resolved immediately
• Ensure credit control activity is effective

In terms of using business finance, I have the following advice:

• Shop around to ensure you get both the best price and structure
• Structure is incredibly important. Use what business assets you have to the maximum effect
• Don't give away security over assets where you don't need to. If lenders ask for additional security beyond what they are actually funding against, shop around
• Try to be proactive and anticipate a funding need well ahead of any cash flow crunch

It is not a time to panic or despair. Be aware of what you are facing and be proactive in seeking solutions.