Seven ways to keep your cash flow positive and boost growth
Small businessesare set to contribute 217bn to the economy by 2020, yet the majority of UK startups still crash and burn in the first five years. The fatal flaw? Weak or negative cash flow.
Writing for Business Advice, Alex Fenton, CEO of cash flow finance company GapCap, gives company owners essential tips to avoid the small business slayer.
Driving the cash flow issue
So, what is behind this cash flow issue that affects up to nine in ten small businesses? it’s a question important to explore for any small business owner who wants to be successful, and while there isnt a single cause, one of the main reasons has to be Britain’s chronic late payment culture.
Currently, late payments leave small businesses in the UK 26bn out of pocket, with clients taking on average 72 days to pay.
As an entrepreneur just starting out, youd be forgiven for expecting businesses to cough up on the exact date theyve promised. Unfortunately, you’re likely to be caught short, with severe consequences for your forecasts and supplier relationships.
These onerous payment terms are only getting longer, and with them the creeping presence of the small business assassin is more present than ever.
Changing your mindset
It is difficult to tackle the problem. As a small business owner, caught up with enthusiasm for your product, it is easy to push the issues of financing to the bottom of the to-do list, or even be embarrassed it’s an issue.
However, negative or lumpy cash flows do not correlate with the success of your business, and unless you want unhappy staff, strained relationships with suppliers and, ultimately, the lights going out you need to be proactive.
Practical tips and tricks
The first step in keeping a positive cash flow isto change your mindset. Repeat this sentence at least once every day: cash is king.
From here on out, every transaction you make, every business plan drawn up, and every new relationship created should be done not only with sales, or even profits, in mind, but cash.
To make it your number one priority, here are seven different steps you can take to boost your growth, and liberate your funds.
(1)Read all the small print. This applies to contracts with your finance facility, your suppliers and your customers. A quick read isnt worth being stung with hidden fees further down the line.
(2)Review contracts with suppliers on a regular basis and try to negotiate better terms as your relationship progresses.
(3)?Make large purchases only when you really need to in order to safeguard your bank account.
(4)?Use credit sparingly it is not free money. The payments will creep up on you much faster than you expect.
Ormsby Street's Martin Campbell discusses why it's a British thing for businesses to be reticent about chasing for payment, and why funding alternatives aren't necessarily the answers to late payment woes. more»