Having healthy cash flow is one of the most important considerations for SMEs, and can make or break a business. A bulging sales ledger doesn’t always go hand in hand with good cash flow, as many SMEs experience late payment issues across the board. So, how can you ensure your business has adequate cash flow to keep afloat and grow?
Make sure your invoicing procedure is accurate and not riddled with errors. A tiny error at the end of the payment period can lead to a customer asking for a new invoice, which then restarts the timer on the 30, 60 or 90 day payment terms. Make sure your invoices are correct to avoid this problem. You should always have a good follow up procedure in place for invoices as well.
If you’re struggling with cash flow, speak to your suppliers to see if you can get any leeway. As late payment issues are passed down the supply chain, they can be difficult to deal with if you’re being pulled in two different directions by late paying customers and suppliers demanding payment. Try to negotiate the best possible balance to keep everyone happy.
Cash Flow Projections
Knowing what’s on the horizon can help when planning financing and general running. This is a particular concern for those businesses with seasonality. Banks are often wary of those businesses that need cash quickly, and having an idea of what you will need in the future can help with this.
Invoice finance is in a particularly strong position in helping SMEs with cash flow. It can help you to invoice correctly, as factoring lenders can take the strain of collection payment for those small businesses without a dedicated finance department.
Invoice discounting and factoring can also help you to keep a good relationship with suppliers, freeing up cash from unpaid customer invoices to allow you to pay bills on time.
This is one form of finance that’s more accessible for many businesses than bank loans and overdrafts. Rather than take on new debt, you can borrow against your invoice values to get almost instant access to the majority of the funds.
If your business needs to improve cash flow, it’s worth looking into invoice finance as a way to access the cash tied up in your sales ledger.