The Bank of England has warned that in the current state of pandemic shock, the UK economy could end up with an aggregate cash-flow deficit of nearly £140 billion between March 2020 and March 2021. To prevent and counteract this, The Bank of England urged companies to finance their cash-flow deficits to avoid situations that would cause longer-term economic damage.
With this in mind, it should be obvious why carefully managing and improving the cash flows of your business is now more important than ever. There are lots of ways to do this, and here are some of the best.
Manage Your Invoices Carefully
While it may seem invasive, setting up email or text message reminders for customers sometime before invoices are due is a practice that has merit. Reminding clients of their obligations when the bill is due and once more if it’s past due also motivates clients. Establishing a line of communication with long-standing and valuable customers may also prove crucial, although it may mean that you have to dedicate time to personally get in touch with them about their invoices.
Furthermore, leniency may be acceptable in a time of plenty, but tardiness of any sort is not an acceptable policy during a time of wholesale economic duress, such as the one we’re facing right now.
Use a Collection Agency If Needed
If you find yourself burdened with bad debtors and delinquent customers, instead of trying to pursue past-due accounts receivable, you should consider hiring a third-party collections agency to take care of that bad debt for you.
Get a Good Accountant
Avail yourself of an accountant’s services is absolutely necessary, even when the economy is suffering the stress caused by social distancing measures and repeated lockdowns. Under the current conditions, consulting one on matters of cash flow improvement is even more crucial, as they can take care of more than your paperwork. Experienced London accountants can help you with invaluable advice and ideas on how to realize the tips in this list, and more.
Expand Payment Options
It’s generally a good idea to make the payment process as easy and accessible to the customer as possible. Focus on cashless payments, card payments, online payments, auto-deduct options, and give your customers as many of them as possible.
Motivate Payments
It’s a good idea to provide customers with additional incentive to pay you. Payment plans that reward customers for paying upfront or will give them just such an incentive. Conversely, bringing out the proverbial stick, in the form of late payment penalties, will motivate debtors to not become delinquent.
Re-negotiate Financial Relations
Times of crisis force people to drive hard bargains and look for a compromise wherever they can find it. Do as much as possible to re-examine your business relations and make sure they’re beneficial and not detrimental to your company. Talk with your landlords, employees, investors, creditors, and anyone else you can think of, and try to negotiate more favorable conditions with all available parties.
Manage Your Assets
In times of uncertainty, it may be prudent to invest in highly liquid assets rather than products that may payout in the long term but will just take resources in the meantime. If you do end up with loads of unshiftable products, consider organizing clearance sales. Monitor orders carefully and make sure you spend money on immediate necessities, not out of sheer habit.
Negotiate Early Payments With Big Clients
Regular and reliable customers, especially if they are big and important, maybe tempted by offers to restructure their payment plan to include more frequent payments, in return for some sort of discount.
Diversify Your Portfolio
If you see a niche in the market that you could occupy at a low cost to the company, take the opportunity to do so. Offer installation or support of your products, rent out assets that aren’t immediately useful to you, consider manufacturing a product that is similar to yours but fulfills a slightly different role. Take advantage of every opportunity.
Secure Funding
If you find yourself short on cash at the moment and think that this situation may improve in the future, do not hesitate to make moves to approach investors or lenders to secure the necessary funds. After all, paying off debt may be preferable to seeing your business go belly up.
Minimize Unnecessary Expense
Look for non-essential expenses you can cut and do so. Cutting non-essential contractors, removing perks for employees, and restricting employee travel at the company’s expense are all preferable to outright cutting salaries or laying off employees.
Seek Government Support
Finally, research and avail yourself of all the government-backed support schemes, grants, loans, fiscal benefits, and other relief options you have open to you.
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