As a new year begins and we reflect on the challenges 2020 presented, now is the time for SMEs to plan for the future. As the saying goes, if you fail to plan then you plan to fail. But where do you start and why?

Cash flow.

Having an understanding of where cash is coming from and where it is going is essential to the financial health of a business and critical to long-term success.

Poor cash flow can spell trouble in a number of ways – late payroll, an inability to pay suppliers and more. Reputation and reliability are vital, plus it can become easy to spend cash you don’t have. Put simply, a business can’t survive without money.

Whilst no one could have predicted a global pandemic, effective ongoing cash flow management would have allowed SMEs to maintain enough working capital to operate through quiet periods. Preparing for the worst will allow you to be confident you’ve got the cash on hand to deal with any hurdles and keep operating.

With some sense of normality resuming and confidence returning, small businesses will focus on re-establishing normal transmission or pursuing growth. However therein lies the challenge – as a small business grows, more cash becomes tied up in accounts receivables and inventory. 

As SMEs focus energy on pitching for business, sales, production, covering rent and  staff payroll, equipment purchases, marketing and more – it’s near impossible to find the time to focus on cash flow. Kick-start the process by using the list below, and fine-tune closely with your accountant or trusted adviser.

EMBRACE TECHNOLOGY

COVID-19 forced a digital revolution almost overnight, with the use of videoconferencing options such as Zoom, Google Meet and Microsoft Teams skyrocketing. Businesses should continue to use these powerful tools to drive engagement. Investigate new customer sales solutions via e-commerce channels, research cloud-based accounting software programs that simplify real-time visibility, reducing the time it takes to proactively manage and forecast cash flow.  

DEVELOP GOOD RELATIONSHIPS WITH SUPPLIERS

Stakeholder management and engagement has never been more important, so SMEs shouldn’t take for granted their supplier relationships. This may help them waiver minimum orders or even offer better payment terms on invoices.

CONTINUALLY ENGAGE EXPERT ADVICE AND IMPROVE YOUR FINANCIAL SKILLS

Work closely with an accountant or experienced financial adviser, as understanding business financials isn’t easy. Financial advisers are aware of all the varied funding options out there such as invoice finance, and whether they would work for your business. From a personal point of view, pursue opportunities to learn and expand your business finance skills. Are there online workshops or webinars worth exploring?

INCREASE SALES

A simple, targeted marketing campaign via social media can be a cost-effective way to promote your business. Is there an added hook that will make the campaign stand out – a special promotional offer or discount?

INVENTORY MANAGEMENT

Stock control is important – during high cash flow periods, modify the timing and quantity of purchases, only holding the stock necessary to run an efficient business. If your business has too much stock on hand, keep in mind the additional storage required and associated costs.

ENFORCE PAYMENT TERMS

Often easier said than done, however late payments can spell disaster for many small businesses. Issue invoices promptly with clearly defined payment terms and conditions. Make it as easy as possible for customers to pay you by offering them several payment options. If your business regularly works with debtors that are regularly paying late, this can be something that can drastically affect the solvency of your business – look into facilities such as invoice finance that can help with this. 

SPREAD OUT EXPENSES

Do not pay all your bills on the same day. Utilise accounting software to set up automatic payments and where possible, spread the payments out. Discuss payment options such as monthly vs. lump sums, as well as work with a financial adviser to understand what lending options are out there that suit your business

LEASING VS. PURCHASING EQUIPMENT

Buying typically requires large lump sums that have an obvious cash flow impact on SMEs. Investigate leasing options that avoid this and are more cash flow friendly.

REDUCE OUTGOINGS

Buying typically requires large lump sums that have an obvious cash flow impact on SMEs. Investigate leasing options that avoid this and are more cash flow friendly.

TALK TO AN EXPERT

 As SMEs review their cash flow, keep in mind the benefits of invoice finance. Apricity Finance helps businesses grow and remove the stress of waiting for big customers to pay their bills.

For information about invoice finance and more on Apricity Finance, visit here.

TALK TO AN INVOICE FINANCE SPECIALIST

Take control of your cashflow and manage your growth. Our invoice finance specialists will listen to your challenges and check your eligibility so you can access the funds you need to reach your business potential.
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