With the world caught up in the pandemic and the economic fall out continuing to affect business, poor cash flow can affect much more than the financial performance of your business. Once the government support finishes, businesses will need to plan for their recovery and also the repayment of the government backed loan if taken. Cashflow planning will be crucial in the months ahead as the non-financial costs of poor cashflow can have just as negative an impact on your business as the financial costs.
1) Inability to pay suppliers
If you can’t pay your suppliers, this can lead to poor business relationships and damage to your reputation. It may also impact your ability to meet your own deadlines and contractual obligations.
2) Missed Opportunities
Poor cash flow may lead to you having to pass up on great opportunities to grow your business, e.g. you may not be able to invest in the machine that will make production more efficient or will have to pass on a supplier’s special.
3) Restricted Growth
Even if you pay your bills, restricted cash flow gets in the way of advancing your business through investments. You may miss out on opportunities to acquire new buildings and assets at good price points, hire new employees or consultants who offer expertise and talent, get bulk discounts on supplies and pay for services your business uses. Stymied growth can lead to low employee morale and looks bad to company owners or shareholders.
4) Unpaid staff wages
No business owner wants to be put in a position where they can’t pay their own staff. Aside from the implications for your employees, you will also risk both reputational and resourcing difficulties.
5) Loss of contracts
Ultimately, if you’re unable to pay your suppliers, your staff or your debts – you could end up losing your contracts. If the loss to your reputation doesn’t do it, then your poor credit score might.
The solution!
One of the most popular ways to alleviate business cash flow problems is to arrange an invoice factoring facility. This allows a business to effectively ‘sell’ its invoices to a finance provider as they are issued. Rather than waiting for 30, 60 or even 90 days for an invoice to be paid, up to 85 percent of the value of the invoice is made available within as little as 24 hours of the invoice being issued to the customer. The business receives the balance of the invoice when the customer finally pays.
To discuss the funding options available to your business. Please do not hesitate to contact us on 0161 280 4220 or lynnew@regencyfactors.com
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