Cash-flow’ is one of the biggest challenges that business owners require business advice about – and with good reason, as it’s generally the venting point for issues like:

  • I’m not getting paid as quickly as I used to or my biggest client is having cashflow problems
  • My suppliers are tightening up on credit terms
  • Turnover is down this month – so there will be less money coming in to cover overheads next month
  • I’ve got the chance of a new contract – but how will I finance it
  • My turnover is increasing well – so I’m making a good profit – but it’s really hard to keep within the overdraft facility
  • I got a very good deal paying cash for a new van three months ago – but it’s making cashflow very tight now.

The list of issues isn’t exhaustive, but the end result is the same – things feel tighter than they used to. So what can you do about it?

I’ve always advocated the motto of “prevention is better than cure” and I know this won’t cover all eventualities, but it is a good starting point, and for those of you who have read previous articles, we are trying to minimise the OSINTOT Syndrome (oh sugar I never thought of that).


Most business owners I’ve ever spoken to are filled with dread at the prospect of a cashflow forecast – from either the thought of doing it, or the cost of paying someone else. But, having a good idea of your cashflow needs (even if it’s just for the next 3 months) is an absolute necessity if you want to remain focussed on business profitability rather than being blind-sided by a lack of money – if it can be avoided.

If you are not good at this sort of thing seek help.

If you are able to DIY, get someone to check it over for you, e.g. your accountant, business advisor, bank manager. This will provide some challenge to your assumptions and make sure you have tested it, with some “what if” flexing included. And don’t forget in most cases, cashflow is a permanent need; it’s just the size of it that changes. Once you’ve worked out what the shortfall is, the next stage is how to plug the gap.

How to plug the gap

There are quite a few options, and typically it will come from one of (or a combination of) the following:

  • Your own funds – by way of loan to the business, capital, share capital. Make sure you get professional advice on the best way to do this
  • Borrowed funds – from the bank by way of overdraft facility. With a well prepared request and a viable proposition, they will always try to support you. There are Government backed schemes
  • Invoice discounting – where you can raise funding against your invoices/ debtor ledger. This type of sales ledger finance is much more popular than it used to be. It’s only suitable for business-to-business sales finance – but can be a very viable source of ongoing funding if it suits your circumstances. Give me a ring if you want to know more
  • External investor – for the right proposition, they can be viable option to conventional funding. But beware giving up part of your business to solve a short term issue can be an expensive decision in the long term. Take professional advice before you do anything

Alternative cashflow solutions

These could include:

  • Negotiate longer terms of credit with your suppliers
  • Negotiate shorter terms of credit with your clients
  • Review your debtor ledger, chase up and collect all overdue invoices
  • Review your stock and stock levels. Get rid of dead stock and turn it into cash, Are you carrying more stock than you really need? very £100 overstocked is £100 less cashflow

Even if your cashflow is strong, these simple measures are good best practice and can improve your cash position even more. This might help your purchasing power, and give you the edge over your competitors.

With the Christmas and New Year period soon upon us, the excuses for late payment go into overdrive and cashflow issues will affect most businesses over the next month or two. So take my advice, anticipate your shortfall, add in a margin for the unexpected Christmas delays (that happen every year!) and plan how you will fund it now; don’t wait, prevention is definitely better than cure.

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