SME Assistance

How can I get cash in my business NOW?

Is there a creditor in your business you’ve forgotten about like the VAT, PAYE, or a supplier or even you’ve got the wage to pay at the end of the month?

I had this issue a few times in my business – not always of my own making eg. Amazon suddenly decide to delay payment because of some infringement I didn’t know about.

What I did learn was that the more time you’ve got to sort the issue out the easier it is to fix – how do you do that? With a cashflow forecast! 

Top Tips
Cashflow Forecast
Create a cash flow forecast so you can plan how to get out of this tight spot.

For future reference
Keep your cashflow forecast bang up to date and keep a close eye on it, that way you will be able to see cash squeezes coming up much sooner.

Sell yourself out of trouble so follow up old quotes and lapsed customers. Speak to your best customers and offer them a deal.

For future reference
Follow up every sales lead – it’s an expensive business getting leads in both time and money so don’t waste them.

Do you give credit? ie. do your customers get their goods/services before they pay for them?

Many people don’t pay their bills until they get a statement. Some not until they get a reminder and some not even then, they wait until you threaten legal action! Have a plan what to do with those going beyond your terms and patience.

Go through your list of creditors, if they are over your stated terms of payment give them a phone call, don’t waste your time with an email. Have a script of what you’re going to say before you pick up the phone.

Always keep it friendly and nice, try not to fall out with your customers unless they are persistent bad payers and if they are ask them to pay proforma in future.

Ask them if you can have payment today. If they can’t ask them when they anticipate paying, if it’s within a reasonable time frame make a note to call them on that date.  If you’re getting the run around send a 7 days before action letter.

Don’t pussy foot around – why should you be stressed out because your customer is slow in paying? They’ve had the goods or services so now they need to pay.

If they still don’t pay send them a 7 days before action letter. There are lots of templates on the internet you can use.

Optionally you could hand the job over to a specialist debt collection firm of solicitors. Often they will send the 7 day letter without charge. When the 7 days are up they will give you the option to issue a County Court Summons and it’s a simple tick box exercise for you. 

Most people will pay up after receiving a 7 days before action letter.

For future reference
Can you take a deposit?
Can you shorten your payment terms?
Invoice for your goods or services as soon as you deliver them, don’t wait ‘till the end of the month
If you don’t already take credit/debit cards set yourself up to take them – even if you are a service based business – make it as easy as possible for people to pay you.
Don’t give customer too much credit – especially if them going bust would cause a serious cash crisis in the business.
If it’s just one large customer who’s caused the tight spot find more customers so you’re not reliant on this customer.

Do you have a good relationship with your suppliers? Ask them for extended payment terms but if you promise a payment date stick to it – they may not be so amenable next time you need to ask.

For future reference
It’s best to keep good relations with suppliers so they will be more amenable to requests like these but also you maybe one of the first ones they will call when they have special offers plus they may share information of trends in you market.

Do you carry stock? If no – move on!
– Get rid of slow/non-moving stockGet rid of slow/non-moving stock
– Find the top selling items by Value and then top sellers by Volume, offer them to the customers who most often buy the product. Avoid discounting – far better to try and do 3 for the price of 2 there by increasing your potential sales revenue.
– Will the supplier you bought the stock from take it back?

For Future reference 
– Don’t buy so much! – there may be an attractive discount to buy in bulk but until you know the popularity of the product and you can gauge demand it’s better to sacrifice some margin and buy small amounts.
Keep an eye on slow/non moving stock and get rid ASAP
– Holding old stock can cost you up to 25% of the value every year 

Service Based Businesses
You will not have any stock to sell off or many suppliers to negotiate with so can you can bundle your services up into packages and forward sell them. Could you offer pre-paid gift vouchers?

For Future reference 
Package up your services with a range of different options and levels of service so you have something to sell to everyone

Temporary Overdraft or Extended Overdraft
Talk to you bank, go with a plan, management accounts and cashflow forecast. Show them how you are going to trade out of the tight spot.

For future reference
Use a cashflow forecast to predict cash needs with worst case scenarios eg. Biggest creditor delays payment for a month
Negotiate an “in case of need” overdraft with your bank
Change bank! 
Review your outgoings are there any you can cancel
– Build up a cash reserve.
Start a new deposit account and put something by each week/month to cover the VAT, PAYE

You think I’ve missed a trick? Please let me know!

If you are in a tight spot right now please do give me a call and we can talk it through, I would like to help.