Running a business is hard work, and keeping your business afloat with steady cashflow can sometimes seem impossible. Even profitable companies can unexpectedly struggle with cashflow, leading to stressful situations like missed payments, delayed projects, or worse. But what’s really going wrong?

Poor cashflow is the real culprit. You may be ordering inventory too early or too late, offering unoptimised payment terms to clients, or lacking a clear invoicing system. These issues result in a cashflow crunch, impacting your ability to pay your suppliers, employees, and other vital expenses.

If these problems are not resolved, your business could face a host of challenges, including escalating debts, late salaries, and supply shortages. At worst, you might have to shut down operations altogether.

As a small business, we understand your struggle and know what it takes to tackle cashflow head-on. We'll work with you to analyse and optimise key processes like ordering, invoicing, and client payments, ultimately helping you unlock steady and predictable cashflow.

While there are many causes of poor cashflow, most of them will relate to one or more of the following seven categories.

1. Cash lockup: Cash lockup means the cash that isn’t in your bank account because it’s work in progress (work you have done but not yet billed for) or you’ve billed your customer but are waiting for payment.
2. Accounts payable process: If you don’t have spending budgets in place and aren’t taking advantage of the best possible supplier terms, your cash flow will be impacted.
3. Stock turn: If stock is moving too slowly, converting the stock you have already paid for into cash will take longer.
4. The wrong debt or capital structure: For example, if your loans are being repaid over too short a term, this will significantly strain cash reserves.
5. Gross profit margins are too low: Your gross profit margin is what’s left from sales value after variable costs are deducted. If it’s too low, it won’t be enough to cover fixed expenses and your drawings from the business.
6. Overheads are too high: Every business should thoroughly review its overheads each year. Ask yourself, ‘Is this expense positively benefiting my business?’.
7. Sales levels are too low: If sales levels don’t support cash demands on the business, then sadly, the business is not currently viable.

By working on these seven categories, you'll resolve your immediate cashflow issues and build a sustainable financial foundation that ensures your business thrives. With improved cash reserves, better financial planning, and streamlined processes, your business will flourish, allowing you the freedom to focus on what matters most: growing and succeeding.

If you're ready to take control of your business's financial future, schedule a Cashflow & Profit Improvement Meeting with us. Let's work together to streamline your processes, enhance your cashflow, and secure your business’ financial health for years to come.