You’d be surprised to hear that more than 80% of businesses fail to survive due to cash flow problems within their organization. Cash flow has always been an Achilles Heel for many companies. It occurs when more money flows out of your business than what is coming into your bank account. A small cash flow problem can result in a full-blown crisis if you don’t take adequate steps to mitigate it.
Many businesses often turn to an expert chartered accountant to help them deal with their cash flow problems. This will be a wise idea as they will bring the necessary expertise and experience to help you deal with your cash flow issues. However, it would be best to have an internal strategy to deal with a cash flow crisis. Timely decisions and active strategy can minimize losses and ensure that your business emerges unscathed from the crisis. So let’s look at some strategies to survive a cash flow problem.
Business Plans and Profit Margins
When suffering from a cash flow problem, you need to go back to the drawing board and scrutinize your business plan and the relevant processes and operations. You need to understand the reasons behind the crisis and whether it has the potential to be a constant problem.
Use job costing to monitor your financial statements and profit margins closely. You can segregate your product categories to determine the areas that need immediate attention. Next, identify areas that bring you the most profits and try to optimize them further to generate more returns. Costly sections can be discontinued so that you can divert your resources to more profitable areas of your business.
Reduce Receivables Turnover
One of the most significant ways to improve your cash flow is to speed up your receivables. The quicker you receive money from your debtors, the sooner you can get rid of your cash flow problems. There are several strategies you can implement to accelerate your receivables. For example, you can ask new customers for partial up-front payment instead of invoicing them the whole amount after the provided services.
You need to send timely invoices and reminders to receive your payments. Make a habit of sending the invoice immediately upon delivering goods or services. The sooner you send an invoice, the quicker you’ll receive your payment and solve your cash flow problems. Also, make payment convenient for your debtors. Offer additional payment methods or give them the choice of making their payments. Ease of payment translates into quicker payments and helps you develop a good relationship.
This is probably the most obvious way to improve your cash flow cycle. First, scrutinize your bank account closely and identify the unnecessary expenses that strain your cash flow. Next, prioritize significant expenses during a crisis and have all your staff on board regarding the expenditure reduction. Finally, aim to spend on costs directly responsible for revenue generation.
In addition to cutting unnecessary expenses, you can also sell non-essential assets sitting idle and are of no use. Even though it’s a temporary solution, it can help you generate the much-needed cash to keep your business in operation.
You will suffer from a cash flow crisis when your outflows are more significant than your inflows. You can consider borrowing options that will bring much-needed money into your business. You could also get a line of credit, credit card, or even a business loan.
However, you need to find a loan that fits the bill and doesn’t put your business in further turmoil. Remember that borrowing is not a long-term fix and will only put a paper over your cracks. It would be best to have a long-term strategy for handling a full-blown cash flow crisis.
Get The Help of Expert Chartered Tax Advisers & Accountants
It’s hard to handle a cash flow crisis on your own. It would be best if you had the expertise and experience by your side who could help you get out of trouble. It is always worth hiring the services of a chartered accountant or tax advisor who can help you build strategies to counter cash flow problems and ensure a healthy running business.
As a business owner, you might struggle to devise a robust strategy to deal with cash flow problems. An expert accountant will know the complexities of dealing with a cash flow crisis and recommend personalized strategies to tackle such issues.
Also, the benefits of hiring a chartered accountant go beyond helping you with your cash flow issues. These expert accountants can bring a lot of quality and experience that will help elevate your business to new heights. They will ensure that your financial matters are handled appropriately and act as your representative on critical tax matters to ensure that you don’t face an HMRC audit.
If you’re looking for a professional chartered accounting firm in Walsall that can handle all your complicated tax and accounting matters, you can’t look past IBISS & CO. The company has recently opened its office in Walsall and comes with a reputation of being the best personal tax advisor in the UK.
They aim to provide their extensive services to businesses in the community and help them grow leaps and bounds. You can get in touch with them today for more information.
About the Author
Mr. Moavia is a highly rated chartered accountant based in the UK who has significant qualifications and expertise in handling various accounting and taxation-related matters. He has considerable experience handling complex tax issues and has worked with businesses of all sizes and stature and helped them with their cash flow issues. His expertise and experience are second to none, and he is highly regarded within the business community as one of the best chartered accountants in the country.