Keeping your business afloat when times are tough can seem an impossible task. But there is help at hand, as David Butler, regional sales director for Close Invoice Finance, reveals.
WITH latest statistics showing high levels of corporate insolvencies and rapidly rising personal bankruptcies, it is absolutely crucial for directors to evaluate their businesses to keep trouble at bay.
The sad fact is that many companies face financial difficulty unnecessarily. According to a recent national survey, one of the key reasons for corporate failure lies with company directors and their ability to bury their head in the sand and ignore a financial crisis.
It should be remembered that cash is king when it comes to avoiding insolvency. A business may be on target to make a profit at the end of the year, but if it cannot pay the tax man, the bank or a big trade creditor on time, then the company may still be a candidate for winding up.
Good credit control and flexible funding are vital measures for ensuring the cash keeps flowing. Two of the best approaches to credit control are to learn customer payment systems thoroughly and to find a more acceptable alternative to a costly bank overdraft.
When a cashflow problem is spotted, the first thing to do is communicate, openly and honestly, with creditors. Creditors are becoming increasingly enlightened as to the benefits of supporting the emerging rescue culture. They understand that supporting a debtor in financial difficulty will often be more astute than pushing for a winding up.
Many cashflow challenges can be avoided, however, by using a well set out business plan with a sensible forecast of income and expenditure. I cannot stress how important this is to keeping operations healthy. After all, very few organisations fail with cash in the bank.
Setting up terms and conditions at the start of trading is also an area which is all too often overlooked. The legalities of purchase and supply are definitely worth immediate in-depth consideration if they have been overlooked to date.
The ultimate key to business survival and success, however, is to plan ahead when the company is healthy and to take professional advice. Cashflow problems do not have to be inevitable, if you have the foresight to understand your marketplace and to research your options thoroughly.