What Happens to Your Cash Flow as a Small Business When You Need to Grow?

Growth is the dream for many small business owners. It means that your business is doing well, and you are reaching new customers who will hopefully turn into loyal ones. However, the decision to grow your business is a major one and a challenge to manage. Cash flow is a top priority, and many things can go wrong when you start expanding.

The implications of growth of course include the fact that as you increase sales, overheads such as headcount, stock purchase, materials, etc. go up as well. This can lead to cash flow issues if not managed properly from the start. The first step in preparing for growth is ensuring you have a healthy cash flow, a flexible line of credit and expertly managed credit control. In this article, we’ll talk about what happens when you need to grow and how to best prepare for it financially.

The hidden financial costs

Growing your company is a challenging and rewarding process but growing can be painful. Very painful. Making sure that your cash flow can meet your obligations as you take on more staff, bigger premises, more stock, or new equipment is a challenge. It doesn’t matter how well established your company is, if you don’t have a handle on your cash flow then you won’t survive the growth spurt.

As well as the more visible and obvious costs of growing your business, there are hidden growing pains such as training new staff which often involves taking existing key staff away from their work to help with the training process. There’s also the time that it takes for new employees to become proficient and up to speed with your business operations and processes. It’s these hidden costs that you don’t see coming, or envisage, that start to silently eat away at your cash flow if you’re not careful.

As you expand your business further, additional increased costs and financial strains start to appear. You may have a stable cash flow at first, but very soon growing pains can start to creep in.

What’s the solution?

As a company owner looking to expand your business, invoice financing is the answer for you. Invoice finance will help make sure that your cash flow is managed and at Partnership Invoice Finance this is specifically aimed at small and medium-sized businesses.

Factoring is an alternative form of finance that allows your company to access cash sooner than waiting for payment from customers. It’s a facility that grows with you; a way to manage your cash flow, reducing the time pressures, admin, and the stress of collecting payments yourself. It’s like having a hidden financial department and safety net. As you grow your business, it keeps pace with your needs and supports growth.

The truth about factoring is, it’s a wise choice for a growing business and is ideal for small-medium businesses selling to other businesses on credit terms.

Factoring provides access to cash without the business having to sell inventory or other assets to pay urgent bills at a time or price that may not be right.

Factoring is a far more flexible option than traditional borrowing – providing finance that grows as you do.
You don’t have to provide additional personal collateral for factoring, which is often required when you take out loans from banks and other financial institutions.
Application process and sanction for factoring with Partnership is quicker than the Bank – usually, a facility is agreed within 48 hours with the first drawdown of cash to you shortly after.
Factoring is an efficient and flexible way of borrowing money.

Factoring gives you access to the value of invoices before they are paid – typically within 48 hours of raising them and whilst most businesses have their whole turnover funded, you can elect to choose which customers your business would like to factor. The financier then provides the funding and manages every aspect of your credit control saving you time and money.

In truth, any growing business depends on maintaining a stable, strong cash flow and invoice finance is the perfect solution to keep your business finances on the straight and narrow. Contact us today so we can advise you how we can help your growing business.