Home Forums Money matters Cash flow issues help

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    • Total posts: 29

    My business has massive cashflow issues, seems to be making me depressed at the moment.
    80% of my business sales are on accounts and each month or week depending on the custom becomes a nightmare or asking for payments.

    Do I need a bookkeep? Better clients? Or is it just how business is?
    My profit and loss dosent even come close to resembling my income

    Cash Flow is King
    • Total posts: 24

    Hi Blahish, We all want better customers that pay on time (!), but that usually comes at a cost, often in sales discounts for prompt payment, or squeezed margins. It’s not how being in business needs to be though!

    What does your business do? Have you ever thought about Invoice Financing? Invoice financing advances you up to 90% of the amounts owing to you, and then the financier gets repaid when the customer pays. You can usually select a Factoring model, that hands over collection responsibility to the financier, or an Invoice Discounting model, where you collect on behalf of the financier. The best parts of it are that (1) the finance line is linked to the value tied up in your debtors ledger, and not a fixed asset like your home, and (2) is repaid when your clients pay, invoice by invoice. So it’s self liquidating, and not core debt like an overdraft can easily become. It operates and costs very much as if you had offered a discount to your customer to pay on 7 day terms, not the 30 or 60 days SME’s regularly take. And Dun and Bradstreet surveys tell us big businesses takes longer!

    I’m a huge fan of using your sales ledger to fund your business, mainly because I’ve seen how small businesses benefit in so many different ways from not having a continual cash flow headache. Having a finance line that is linked to the B2B sales you make frees you up to find and service customers, not juggle the bank account. It’s also been my chosen occupation for 30+ years, so not surprisingly I’m an advocate!

    • Total posts: 840

    My question would be, what have you done to resolve the issue. No point in just complaining about bad customers. If you have allowed this position to start as well as continue then you have to accept the customer will continue their same practices.

    When I go back to my old banking days, quite often cashflow issues came as a result of things like misaligning income with expenditure, poor stock projections, lack of efficient accounting system, just to name a few.

    Without knowing what you do, can’t really offer more than that.

    Factoring is one option if there are real issues, but it has a cost and shouldn’t necessarily be the first option to consider. Why pay for a service if there are other options that may not cost (improving collection practices) or less cost (discounting).

    Better to get a more qualified opinion from someone who can get all the information to make an assessment of the real problem and make a solution based on that.

    • Total posts: 29

    We operate a wholesale only bakery, 95% of what is made is for orders with the exception of the supermarkets where its up to use to stock the shelves and take returns
    I have a mixed of 7 day and 30 day accounts,
    After the account it over due by 2 days I send a email, followed by a phone call asking for payment.
    As much as I want to just stop supplying it would hurt my business to do that.

    • Total posts: 11

    Hi there,

    Firstly can I just say that you’re not alone. This is a situation that I find many clients in. It doesn’t have to be all doom and gloom, there are ways of identifying issues causing your cash problem and ways to resolve them.

    I would recommend taking a look at a variety of your business areas such as:
    – Cost of Goods Sold, how much does it cost you to produce what you sell?
    – Look at your pricing, are you heavily discounting your items? Can you review your pricing to increase your margin without risking losing valuable customers?
    – Assess your inventory procedures. Are you moving your product efficiently? Are you holding onto inventory for longer than is optimal? How much is going into wastage?
    – Then as you mentioned, assess your debtors. Do you have any outstanding debtors that need to be followed up? Can you tighten your trading terms anywhere?
    – In that thinking, are you able to extend your credit terms with your suppliers?
    – Take a look at your general overheads and expenses. See if the belt can be tightened anywhere else.

    It’s unfortunate that you are feeling the heavy burden of such an issue, but there are industry professionals out there than can help you. As a bookkeeping specialist myself, I can assure you that you are not alone, and your issue is a very common one.

    If you would like some further assistance or information, or even want to be put in touch with someone in your area, please contact me. I’m only happy to help.

    Kind Regards,

    Karice Grundon

    • Total posts: 29

    Cogs and inventory turn off is fine, we make product to order.
    I just have one or two customers that I need to constantly chase for money each week or month.
    I understand cash flow is a problem with most businesses, but it doesn’t make me feel better when I have to arrange to pay off repair bills when I have a customer who owes me a substantial amount of money. ( This customer I have a contra account with so its makes it hard to rock the boat to much)

    • Total posts: 840

    So is it massive problems, or is it just one or two customers causing a problem?

    “As much as I want to just stop supplying it would hurt my business to do that.”

    How much is it hurting your business by continuing to supply on this basis?

    You have three options:-

    1. Continue as is, in which case everything stays the same.
    2. Confront the customers, in which case they will either make better effort to pay on time or get angry and leave, or
    3. Cut them off. In which case they either pay by cash or leave.

    If it was me, I’d be working option 2. Confront doesn’t have to be a bad thing. It can also mean talking to them, discussing why you need to receive payments on time, and it can also provide you with better understanding of why they are always late in paying. Perhaps there is an easy solution. Perhaps they are happy to pay late because they know you will phone them to follow up.

    If you fall into the ” I can’t say anything because it may upset them”, category, nothing will ever change for he better.

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