What do you do if the banks refuse to lend to your business?
There are ways to find cash within your business and it is interest free. Cash is the key survival tool in business whether in good times or during economy crisis
Cash is a very important resource. Plan your cash flow requirements carefully. Work out how much cash is needed to pay suppliers and business expenses each month. Look at whether the current sales receipts sufficient to cover these outgoing? If the answer is no then you should consider preparing a break even analysis on your products and services to see the minimum sales you should make each month to break even.
Take care of your customer.
Offer your existing customers discounts and incentives to keep them happy. Retaining good customers are required hard work.
For new customers, carry out some creditworthiness check before granting generous credit terms and consider shorter credit terms or no credit at all. If you are Barclays Bank customers, you may sign up for CreditFocus Classic which allows you to check the creditworthiness up to 5 customers for free.
Review your debtors
You must keep your customers ledger up to date in order to know the true figures owing from your customers. Make sure you call your customers to follow up on due and overdue payments and send reminders.
If there are signs of these customers facing cash flow problem, there are likely that these debts will turn bad and will eat up your profit or even give you a loss. To reduce these risks, offer installments plan and consider stop supplying in credit until their payments are up to date.
You may also consider charging interest on late payments. However, you must inform your customers of this clause existed in the sales contract. Also, on-going creditworthiness check is recommended.
Compare forecast versus actual trading result
It is always good to prepare a forecast for your business. Normally forecast is prepared on 12 months basis. Be realistic when preparing your forecasted sales and expenditure. This forecast can serve as a performance target and also give you the overall picture of your business and tell you the safety margin.
On-going review of forecast versus actual trading results will help to highlight the business activities that require your attentions.
Keeping your accounts up-to date
It is important that you keep your accounting records up-to-date especially your cash in hands and bank accounts. If you are using accounting software to maintain your accounting records this is even better for you as you can easily retrieve profit and loss accounts and your balance sheet every month to see how the business is performing.
Control your business expenditure
Think about possibility of terminating service contracts that do not offer competitive advantage to your business. Consider asking your existing suppliers for discounts or incentives or even downgrade the services to basics plan to save up.
Review the currents overheads for possibility of cut down.
Dispose of idle business assets
Think about disposing some of the unused business assets such as vans, office furniture and computers to get some cash.
Do not hold stock in the warehouse
There is little use of holding on to large stock in the warehouse because selling them now does not make you a good profit. This will only tie up your cash in stock as eventually you have to pay your suppliers whether or not your stock is sold. Consider selling the stock at discounted price to generate some cash and also reduce the need to write off the stock due to obsolete.
Concise Accountancy - UK London Chartered Accountants - Cash is life blood of business