Managing Your Cash Flow in a Challenging Market

Managing Your Cash Flow in a Challenging Market

Cash flow is often described as the lifeblood of a business – and for good reason. While generating revenue is important, keeping a close eye on the money coming in and out of your business is crucial to keeping operations running smoothly and supporting long-term business growth.

What is Cash Flow?

Cash flow is the amount of cash that comes in and out of your business. When you have positive cash flow, you have more cash coming into your business than you have leaving it but when you have negative cash flow, the opposite is true.

A continued negative cash flow will make it difficult to fund your business’ day-to-day operations so by ensuring there’s always money available to cover your rent, bills, and daily expenses, you will protect your business from any unexpected setbacks.

Managing Your Business Cash Flow

Cash flow challenges are common for many businesses – even profitable ones can run into trouble if payments are delayed, or expenses pile up at the wrong time. But with effective cash flow management, you can stay ahead of these issues and protect your business from any unexpected setbacks.

Ways to Improve Cash Flow:

1. Invoice as Soon as You Can

Don’t delay sending invoices. Ensure you set clear payment terms and follow up on any late payments too.

2. Review Your Spending

Log your business’ expected income and outgoings to understand your budget and regularly review your spending and cut back where possible.

3. Plan for Different Scenarios

Use scenario planning to anticipate how changes might affect your cash flow, helping you prepare for potential challenges.

4. Build a Cash Buffer

Aim to set aside a portion of income during good months to help cover unexpected costs or shortfalls.

5. Consider Financing Options

A loan from a commercial finance provider can help when facing large upfront costs or delayed payments.

We recommend creating a cash flow forecast for at least the next three months to know if any shortfalls in cash are likely. Tools such as Xero’s cash flow calculator will help you calculate your net cash flow and forecast your monthly finances. But if you are struggling with preparing a cash flow forecast, our team of experts can help.

If they are shortfalls, it’s important to either reduce spending, or find another source of funding – such as a business cash flow loan, to plug the gap and keep trading.

As an example, Phoenix Commercial Finance was recently approached by the largest supplier of Asian traditional wear in the UK for a business cash flow loan. Like many businesses in their industry, they rely on maintaining strong supplier relationships, which often means paying for stock in advance.

However, just as they were preparing to place a major order, they realised they were facing a temporary cash flow shortfall and needed £500,000 immediately to ensure the order could go ahead.

Understanding the urgency, we immediately gathered all the necessary financial information and submitted the application at 11 AM that day and by 4:30 PM, the £500,000 was in our client’s account.

With our help, the client was able to place their stock order without any delays, ensuring uninterrupted operations. What’s more, they were able to maintain supplier trust and secure future trading terms.

Solutions to Support Cash Flow

Supply chain disruptions, driven by Brexit and the lasting effects of the COVID-19 pandemic, have created a volatile landscape for UK businesses. Rising costs, shifting customer behaviour, and broader economic uncertainty continue to put pressure on businesses. In this climate, maintaining healthy cash flow can be the difference between thriving and merely surviving. By staying on top of your numbers and planning ahead, you’ll be in a stronger position to handle any challenges that come your way.

Don’t let cash flow challenges hold back your business – if you’re considering a business cash flow loan, contact Phoenix Commercial Finance on 02080028736 or fill in our online form and a member of our team will be in touch with you shortly – we’re here to help your business grow.