As the recession starts to bite more and more businesses are experiencing cash flow problems and often this is leads to reducing staffing level and time constraints.
When the pressure is on the key issues are to:
- Get in more work and
- Reduce your overheads
This means more time and effort concentrated on sales and, if you have had to cut staff, it inevitably means that those remaining have more to do and less time for payment chasing, as nobody likes doing it. It is the first thing to get left and, if you’re a sole trader, it means stretching your day to spend more time selling and less doing the paper work.
You would think that lack of business is the commonest reason for business failure, but the reality is that mismanagement of cash flow is. Remember that the banks are no longer there to help when problems arise. By extending credit to your clients you are effectively providing them with free finance. So keeping your cash flow on track, minimising late payment and avoiding bad debt is the key to survival.
There is a large increase in businesses resorting to winding up petitions to try to force payment. This is a costly and time consuming process and brings everybody else out of the woodwork who are also chasing payment from the same client.
So it is important to be first on the payment list and avoid that route and you can only do that by being on top of your payment chasing and, if you can’t do it efficiently in-house, then consider outsourcing.
Considering how crucial this is to businesses, Cashew Group is offering a free cash flow appraisal – please click here to find out more.