The news has recently highlighted many reports of SMEs in difficulty due to cash flow crisis problems and a lack of funding. A recent report of over 500 businesses in the UK by Ever line has now confirmed this
fact, suggesting that small UK companies are experiencing a serious cash crisis.
In fact, in this report, 7 out of 10 companies said that regular access to cash flow was a vital part of maintaining a healthy company but nearly 30% of these companies struggled to keep a regular cash flow in check. This has many implications, including the fact that there is less opportunity for business growth.
Of the companies surveyed, 23% have put their marketing efforts on hold, and 28% paid their invoices late as a result. Nearly 20% of companies also stated that they suffer a cash shortage at least once a month. 90% of companies said they often has a monthly cash flow shortage of up to £5,000.
With these figures in mind, it is important to recognise the crucial nature of having a healthy working capital. Although there is no “one size fits all” approach, there are some things you can do to help you capital. A company may want to improve their working capital by employing one or more of the following strategies:
#1 Get a financial advisor
A financial advisor may be able to review your finances from a third person perspective. They may be able to identify areas that you may not have seen yourself. You can get business advisors through reputable companies by doing simple online searches.
#2 Restrict your overheads
It can be easy to over spend on things which you might not need, on a monthly basis. Think small, because things really do add up. Take tea and coffee for instance. Are you paying for everyone to take a coffee break with the finest coffee? Lay off the spending on these overheads and you may start to see a noticeable difference. Many companies have made these small changes to try and increase the quantity of working capital.
#3 Business loans
Sometimes SMEs putting their personal finance at risk to grow their business. If you are in desperate need for some finance to help invest in your company, but just don’t have the working capital then you might consider a merchant cash advance. A perfect loan for businesses who take in a minimum of £3000 in card transactions each month. With a cash advance you can be advanced anything up to £150,000 and you only need to pay this back with a small percentage of card transactions when your customers pay. It’s flexible, easy and gives you a way of growing your business or bridging working capital gaps.
However you decide to keep your working capital in check, it is important to keep a close eye on your finances (perhaps run a regular “health check” with your finance team to monitor progress.)