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Top Tips for Cash flow management

There's only one way to run your cash flow when you are short of funds and under pressure, you have to visit every piece of expenditure and question if it is truly required. There are many pitfalls, so here are our top tips to running your cash flow in a distressed environment, and making sure that your ability to deliver your products and services doesn’t grind to a halt.

Tip 1 : Construct a 13 week cash flow forecast. The process of constructing a cash flow forecast will help you to identify opportunities to improve your cash flow, and understand the risks.

Tip 2 : Have a plan. Figures are only a guide, and there must be a good story and plan behind the figures that you, your lenders, shareholders, and your creditors can believe.

Tip 3 : Cash injection to buy time. It's not easy to do, but it can be achieved if the plan is good, but you may need specialist help.

Tip 4 : Are you solvent? If your cash flow problems are severe and things are getting tough, then you should take advice from an Insolvency Practitioner and possibly an Insolvency Lawyer. We are happy to help guide you through this process and introduce you to our trusted partners.

Tip 5 : Maximise your Receivables. You need to re-visit every Debtor and question every invoice, ask for payments earlier, pull in all your favours, chase every overdue account and press harder, issue notice of legal proceedings and start the legal process.

Tip 6 : Minimise your Payments. This is the hard part, but you must talk to your creditors. If they trust you and believe the plan, they are likely to support you. Keeping your services running can be achieved, but you ought to get help from an experienced Turnaround Practitioner who has been there before.

Tip 7 : Talk to your bank. You must talk to your bank and keep them informed. The last thing that a bank wants is a surprise as it often destroys their trust in the Directors.

If things are very difficult and there is a real risk of insolvency, you should seek professional advice as you can't continue to accept services from your suppliers and increase their exposure. To do this, could be deemed as 'wrongful trading' and those creditors could make life very difficult for you should things fail.

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Stephen Moon, Director, Venturn Ltd

Further Reading on our recent articles,

Top tips for an Operational Turnaround

HMRC Top tips dealing with Time-To-Pay cash

Common causes of business failure

Key elements of a smart business turnaround

Why a quick fix is not the answer

Stephen Moon elected Vice-Chairman of Institute of Directors (IoD) Coventry & Warwickshire

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