Making ends meet is never easy, but it’s especially tough for small and medium-sized businesses (SMEs). With rising costs across the board (at every level of the food chain), it’s more important than ever to have reliable cash flow. And while payment lag is inevitable, there are things you can do to prevent it from becoming a major problem. In this blog post, we’ll explore some practical tips for SMEs trying to stay afloat in today’s challenging economy.
The importance of healthy cash flow for SMEs.
For all businesses, big or small, cash flow is the lifeblood of their business. It’s essential for funding regular operations, paying staff and other suppliers, investing in growth opportunities, and managing finances on a day-to-day basis. A healthy cash flow also allows the business to keep on top of creditors and to pay any outstanding debt promptly, thus preserving its credit rating. Maintaining good cash flow can increase profits and help businesses develop new products or services that are attractive to customers. By managing cash more efficiently and staying on top of payments, SMEs can boost financial performance while mitigating risk.
The rising costs of running a business.
Starting, and then running a thriving business is no easy task, and the cost of doing so can often seem overwhelming. From overhead costs such as rent, utilities, and equipment to variable costs like labour and inventory, businesses must think carefully about how they spend their money in order to remain successful. Many business owners find themselves turning to loans or investors for the necessary funds needed for their business to survive.
As the cost of inflation continues to rise, businesses are having to pay an increasingly steep price for goods and services – making it even more difficult to turn a profit. For business owners hoping to succeed in the long term, it’s important that they are budgeting appropriately while also striving for growth. Despite these challenges, with careful planning and hard work, a successful business can be built.
Payment lag and how to prevent it.
It’s important for businesses to be aware of the implications that payment lag can have on their bottom line and their available cash flow. Payment lag (or payment delay) occurs when businesses wait too long to receive payments from customers, resulting in both cash flow issues and potential reputation damage amongst supplying partners. Constant monitoring of slow payers is crucial in attempting to avoid payment lag and companies should set up efficient communication systems with their customers to ensure they are up to date with payments.
Additionally, creating more detailed invoicing processes that have clear terms and conditions will help avoid conflicts regarding the invoice, while also encouraging regular payments. Businesses should also remain on top of any changes in their client’s financial situation and credit rating in order to effectively manage potential payment delays.
Tips for improving cash flow.
Managing cash flow can often be a difficult task, however, there are some easy steps to follow to help keep it running smoothly. First, it’s important to track all cash inflows and outflows in order to gain an understanding of where the money is coming from and how it is being spent. Creating a budget will also be crucial for staying on top of payments and making sure all bills are getting paid in a timely manner.
Implementing automated payment systems may also be beneficial for making sure bills are getting paid as soon as possible. Invoice clients quickly and clearly so that payments can be accepted faster, and mistakes avoided. If you need advice on business accounting, it’s also essential that you seek expert guidance and advice from a professional advisor. Implementing these tips should help increase cash flow significantly over time.
Do you want your business to thrive or just survive?
If your business is only surviving but you want it to thrive, then you should consider the option of invoice finance. It can be a great way to free up working capital, as well as remove the burden of chasing up receivables. Invoice finance providers are able to manage all aspects of credit control which can be of particular benefit to many companies that have limited available resources and staff.
With an invoice finance agreement in place, you can have peace of mind that your provider will deal with the credit control function competently, leaving you to focus on other core operations in the business – allowing your business to start thriving.
Contact us for more information on the benefits of invoice finance and how it can take your business to the next level.