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Solving your business cash flow issues

Published on 25th May 2017 - Last update on 19th November 2019

Becoming your own boss is easily one of the most daring career moves that anyone can make. There are so many obstacles, challenges and unknowns to overcome in order to turn a leap of faith into a strong cash flow generator. But with access to the right advice and your focus pointed in the right direction there’s no reason why you can’t succeed. That is why the business finance experts at Rangewell are offering you sensible advice to conquer one of the most common issues in business – cash flow issues.

Cash Flow

The one objective that unites every business owner is the necessity to serve. Each day, we aim to provide goods and services to as many customers as possible. Only when you’re successful in this goal will your business possess a strong and resilient cash flow, ensuring a sustainable long-term future. However, often when we least suspect, issues may arise and threaten your cash flow. A weak cash flow is something no business owner can afford to overlook. Delaying will only allow the issue to worsen and affect more areas of your business. Time for your business to fight back.

Cash Flow Forecast

A cash flow forecast is something that every business owner must regularly put together and adjust where necessary. Ideally, a cash flow forecast should give you a reasonably accurate projection for the next 3 months, taking into account a number of factors concerning cash flow, incurred costs and expenditures. When the forecast has been assembled it should be able to answer a number of poignant questions including:

  • What do your estimated sales figures look like for the next 3 months?
  • What are the costs and terms of your suppliers?
  • What seasonal issues may affect your cash flow?
  • Are there issues that could affect deliveries from your suppliers?
  • Do you need to raise or lower the amount of staff in your business?
  • Are you able to cover utility bills?
  • Are you prepared for your next VAT demand?
  • Do you need finance to support your business?

It is imperative that your cash flow forecast answers all of these questions. Doing so will offer you an indication of what issues to expect and will guide you on how best to navigate your business around them. Preparation will prevent you from wasting cash and allow you pick the right strategies for your business.

Common causes for a weak cash flow

The first step to solving problems inside your business is to acknowledge their existence. If your business happens to run into issues, do not delay. No one likes receiving bad news and would no doubt be tempted to bury their head in the sand. However, issues never go away by themselves, a full-on proactive response is needed.

Sadly, most of the common issues that can plague our businesses tend to stem from issues beyond our control. One day your business could suffer from a burst pipe, power cuts, vandalism, delayed payments from your customers, failed deliveries by your suppliers, unusual weather conditions and so on. Of course, it’s impossible to predict what can befall your business, let alone when. The most important and beneficial thing you can do for you business is to react now and form a contingency plan. After all, inaction tends to have severe lingering consequences.

Solving your cash flow issues

If your business finds itself in the midst of an emergency, every moment counts. You need to contain it and apply a solution fast. Challenging issues affecting our business’ cash flow can be a headache, but leaving it to a later date will allow it to fester and become much more troublesome. Sometimes it can be a matter of doing something differently, modernising your establishment, sourcing better equipment, accessing funds that you’re rightly owed and so on.

But no matter what it is that’s affecting your business, acquiring access to external funding can make all the difference. Although many banks are choosing to close their doors to SMEs, the Alternative Finance sector is opening up and giving a much wider selection of finance options than ever before. Yet with thousands upon thousands of finance solutions available, ensuring that you’re choosing the right solution for your cash flow woes can be another hurdle in your way.

That is exactly why the services offered by Rangewell are so crucial for many business owners. With our in-depth expertise covering a number of industries we can find you the perfect finance solution to your cash flow issues, including Invoice Finance and Asset Refinance.

Invoice Finance

Invoice Finance is a popular means of unlocking the money contained within any unpaid invoices in order to support your business. When considering this method of finance for your business it is essential for you to understand the two types you can apply for and how they work.

  • Factoring: lets you borrow a lump sum equivalent to around 90% of an outstanding invoice’s overall value. With this option you’re the credit controller, ensuring that payment owed by the customer in question is forthcoming. Until you’ve received full payment or begin taking regular instalments you won’t be required to begin the fixed monthly repayment process, plus interest. That said, however, lenders may choose to specify a period laying out exactly how long they’re prepared to wait. Should this period expire, the lender will begin the repayment process regardless of whether or not you’ve been paid.
  • Discounting: allows you to borrow up to 80% of an outstanding invoice’s total worth. With this option, however, the customer responsible for the invoice will instead pay the sum owed directly to your lender. You also have the option of making yourself the credit controller or making use of the lender’s ledger service, if available. Once the lender has received full payment from your customer, you will be required to transfer the remaining 20% into a facility run by the lender. After the deduction of any fees and service costs the remaining sum, or balance, is returned to your account.

Asset Refinance

Another excellent way of acquiring funds is by using Asset Refinance. This option allows you to gain access to the money tied up in your business’ assets. When applying to a lender, they will send around a representative to determine the value of any assets that will become part of an agreement. The value of each asset will be subject depreciation. Should the lender agree a lump sum will be paid directly into your business account. Although the lender will have temporary ownership of the equipment involved, you can still make full use of them whilst paying fixed monthly repayments. Once the finance product has been fully repaid, you will regain ownership of the assets involved.    

Why Rangewell?

Our values are simple – We’re on your side. Our services are clear and transparent. We support a wide range of SME businesses of every shape and size, for finding every type of finance. Follow us on Twitter and LinkedIn for business tips and tricks, and feel free to call us on 0203 637 2340 if you’d like to chat about what we can do for you.

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