Running a business involves the maintenance of a steady cash flow in order to facilitate growth. Regular positive cash flow is hard to maintain without the use of services and tactics that compensate for naturally occurring losses or pauses in profit. Here are some ways in which British businesses can improve cash flow.
Invoice Financing
Invoice financing is a kind of funding method that allows cash to be released relative to the number of unpaid invoices a company is owed. Brokers like Fundinvoice.co.uk take into account the amount of money that a company is owed before arranging for a finance company to provide a client business with funds. UK businesses frequently use invoice financing as a way of making sure that they do not hemorrhage cash due to long customer payment cycles. Because client companies can prove that they are owed an amount of money by their customers, they can negotiate good rates with brokers.
Combatting Seasonality
Many businesses are extremely seasonal in nature. They rely upon seasonal holidays and events in order to make the vast majority of their money. A flood protection company, for instance, may not make an awful lot of money during the Summer months. In order to improve cash flow, many businesses have started to deliberately diversify away from the seasonal market. A good example of this practice can be found in the education sector. Universities – which are naturally extremely seasonal – have started to make the most out of their resources by hosting conferences and retreats during off-term periods. Almost all companies have some way of utilising their expertise or resources to maximise cash flow during off-peak times.
Work With Customer Payment Cycles
Businesses that sell services receive money according to customer billing cycles. Simply put, a customer billing cycle is the period between one billing statement and the next billing date. Each industry operates using a unique billing cycle style. In order to improve cash flow, businesses can try and stagger the individual cycles of each customer. This can make sure that there are no significant gaps in cash flow. Reducing cashflow gaps is especially important in industries that deal with small quantities of high-paying customers. Construction companies, for instance, may only get a few contracts per year. They need to ensure that billing cycles are staggered so that the flow of funds remains constant.
Regular Accounting Audits
In almost every field of business, cash flow is impacted significantly by poor accounting diligence. Incoming, outgoing, and stored money should be accounted for with extreme accuracy. The regular auditing of accounts helps to eliminate financial silos – in which money is stored and forgotten for no good purpose. It also enables business leaders to recognise wasteful patterns of spending and areas in which income could be distributed more efficiently. Accounting audits also help businesses ensure that they are following government financial regulations. Many companies choose to work with third-party accountancy firms when conducting audits: allowing their in-house accountants to continue completing their regular book-balancing tasks.
