Managing Cash In Difficult Times

November 25, 2012 at 8:54 pm

By Janette Whitney ACIB MCMI of Award – Winning Business Consultants, Janette Whitney & Associates

Businesses don’t fail because of a short term lack of profitability; they fail because they run out of cash.

The Solutions:
• Make sure your cash flow plans are regularly updated and are realistic.
• Allow headroom in your cash requirements to counter unexpected variances.
• Be aware of your current cash position, forecasts and bear in mind fluctuations.

Manage Your Working Capital:
• Closely manage your stock and debtors to minimise needs for working capital.
• Manage your supply chain to gain maximum credit.
• Talk to creditors early if you need to extend terms.
• Consider approaching your tax authority to agree payment by instalments for past liabilities.
• Don’t ever commit to buying goods & services when you know you will be unable to pay. This is illegal.

Explore Finance Options:
• Get the right balance between equity, long and short term debt and asset based finance – don’t take on short term borrowings for long-term investments.
• Examine opportunities for grants & tax credits.

• Consider credit insurance to remove the threat of bad debts.
• If the business is failing, recognize the fact and take professional advice. Don’t operate in a mirage of optimism.
• If you are confident of recovery, seek new equity, bank or asset-based borrowing. If institutions won’t play ball, try business angels, but don’t feed the dragon!

Watch points:
• Think carefully before committing to a business model that will require further funding down the line, unless that further funding is contracted.
• Success (e.g. higher sales than forecast) can increase working capital requirements and cause cash shortages – but don’t overtrade.
• Underperformance (e.g. lower sales, lower margins or higher costs) will adversely affect cash flow. Consider reducing overheads to stop the cash drain, but take care in deciding which areas to cut.

If you need a professional independent review of your business, then please contact me at Janette Whitney & Associates on 01403 733671 or visit for more information.

Entry filed under: Business Growth, Finances.

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