Cash flow management is vital for every business. Even profitable, fast-growing companies can get into trouble if they don’t have enough working capital to fund their day-to-day operations – and firms can go under in these circumstances.
The reality of running a business is that customers don’t always pay for goods and services straight away, especially if your firm is business-to-business, as is the case for Growth Lending’s clients. Equally, every business has its own suppliers to pay, as well as an abundance of other costs.
Paying those bills can be tricky if customers take longer than expected to settle their invoices. And, as the business grows, there may be periods where outgoings increase before revenues catch up.
The good news? There are ways to improve how you manage your working capital, to ease cash flow tensions – we share our top five tips below:
1 – Manage your inventory
Good stock management relies on balancing the need to have products ready when customers order them, against the dangers of tying up too much cash in excess inventory.
By planning ahead and assessing demand – there is software that can help with this – you can keep your stock lean, but not so lean that you cannot meet orders. This will reduce the need for warehouse space and keep your suppliers’ bills down, helping to optimise your working capital.
2 – Resolves disputes quickly
Disputes with customers and suppliers sap both time and resources, but can also destroy relationships. Prevent payment disputes from escalating by addressing problems at the earliest stage: make sure customers know exactly when their invoices are due and keep suppliers informed of any problems that the business may have with paying them.
3 – Streamline expenses
Make it a habit to review your business costs regularly in order to identify any unnecessary expenses that are compromising working capital.
For example, can you get a better deal from your existing suppliers or could switching suppliers save money? Are you investing in the business in the most cost-effective way?
Asset finance arrangements and leasing deals can reduce the need to tie up capital in large investments.
4 – Ask for discounts
Some suppliers offer discounts for bills that get paid quickly. While this may seem counterintuitive if your firm’s working capital situation is difficult, getting on top of cash flow makes paying suppliers early a more feasible option and only further strengthens the business’ capital position so that it can re-invest elsewhere.
5 – Outsource accounts receivable
It can be costly and time-consuming to chase up invoices. By outsourcing this process to an invoice financier like Growth Lending, you accelerate access to the capital currently tied up in invoices, reclaiming your time and improving your overall cash flow position.
Does your working capital cycle need a boost?
If your cash flow needs a boost, working capital funding can help. Growth Lending has a variety of products, from flexible invoice discounting to revolving credit facilities, that help bridge the gap between paying suppliers and receiving payments from clients.
We also have a client portal and dedicated portfolio managers to make the funding process smooth and swift, so that strengthening your cash flow position becomes a triumph, rather than a chore.