5 ways for SMEs to smooth uneven cashflow during a slow trading periodPublished on 13th November 2018 - Last update on 20th September 2019
As a small business owner, you’ll naturally want to ensure that your cash flow is reliable month on month, giving you the confidence to invest in and develop key areas of your business. However, the path to success is never linear, and neither is your business’ cash flow. Just when you thought your cash flow was steady and reliable, something unexpected may come along, plunging you into a slow trading period - a situation that every business owner dreads. However, there are steps that you can take to remedy the situation and smooth your business’ cash flow during this time - providing you know how. So get to your small business’ cash flow back on its feet and standing tall, here are 5 simple ways that SMEs can smooth uneven cash flow during a slow trading period.
Effective accounting processes and forecasting
If your small business is to retain a reliable cash flow that’s able to support your financial obligations and ability to invest, forecasting and monitoring your accounting processes is essential. As such, you need to write up a detailed list outlining how much revenue your business is earning and assess how much of it is going towards your outgoings with the support of your accountant, who will create a report called a ‘statement of cash flows’. Using this, you can more easily determine whether your business is spending too much money and needs to cut back, or whether your current levels of investment are sustainable.
In addition, you may want to start using accounting software to help you in regularly generating a cash flow forecast, making it easier for you to plan out your business’ financial obligations and informing you of what debts need to be paid and when. If so, some of the popular systems you might want to look into include Xero, Freeagent and Sage. If necessary, there are also a number of business lending solutions available that can help your business settle debts on time as well, for example, Overdraft Replacement and Merchant Cash Advance.
Monitor your account receivables
If your business trades goods and/or services on credit with other creditworthy businesses, you should always make the effort to regularly monitor your business’ account receivables, giving you the means to ensure customers pay you back on time and that cash flow can remain steady. As such, you may want to consider setting up automated invoicing systems for your business, like Quickbooks, Zoho or Concur. Using such systems will not only allow you to track your outstanding invoices but also send out periodic reminders to both you and the customer concerned as well. However, if any one your customers are late in paying you for whatever reason, you could choose to support your business with an Invoice Finance agreement in the meantime, if necessary.
Effective stock rotation
Another great way of smoothing uneven cash flow is by making sure that you have effective stock rotation processes in place. That’s because your business might be experiencing cash flow issues on account of changing customer trends or you might not be bringing in fresh stock fast enough to meet demand, resulting in a loss of potential revenue. By using a stock management system you can monitor in real time your business’ inventory levels, informing you of what’s being sold and needs replenishing, whilst also telling you what’s not so popular and should be replaced with something else. Just some of the stock management systems on offer to small businesses are available through providers such as Saxo, UnleashedSoftware.com and Ochiba. However, if you’re looking to replenish your small business’ inventory levels but need further assistance to do, you may want to consider an Inventory Finance agreement as well.
Accept credit and debit card payments
Although cash is still king, especially outside of London, more and more UK shoppers are choosing to purchase goods and services using either their credit or debit cards. If you haven’t installed a card processing terminal or an EPOS system in your business, you could be losing out on another source of revenue without even realising it. But if you want to turn this around and bolster your business’ cash flow in the process, just some of the systems available to SMEs include EPOSnow, iZettle and Toast.
Review your pricing and offer time-limited promotions
In addition, you may want to review your current pricing and assess whether any changes could be made which might improve your situation. Are customers turning away because you’re perceived as too expensive? Or do you need to raise prices in order to support your operating costs? Whichever way you choose, you need to strike a balance that’s both fair to your customers and the demands of your business.
You could also consider loyalty schemes, limited offers and discounts to entice existing customers back to your business and attract newcomers as well. To give you some ideas, many UK businesses use schemes such as free trials or samples, free delivery, point schemes, coupons and competitions, all of which can help get your business get noticed and start word-of-mouth discussion. Though it’s entirely up to you what schemes your business uses, just remember not to give away more than you can afford.
Need help smoothing uneven cash flow?
Cashflow is a vital aspect of running your own business and seeing it succeed. However, were you to enter a period of slow trade, maintaining your bottom line can become a real problem. Though there are plenty of ways that you can support your business’ cashflow yourself, you may at times require some outside assistance as well. Fortunately, the Alternative Finance industry is enabling more SMEs than ever before to access the funds they need to support their cash flow, so all you need to do is choose a product that’s right for your business.
At Rangewell, we’re an Access to Finance specialist wand have mapped over 400 lenders to offer business owners an overview of more than 23,000 business finance products. Our services are free to use, hassle-free and we’ll also guide you through the application process. So if you’re looking for a way to support your small business’ cash flow, apply for Cashflow Finance today or find out more with Rangewell.
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