- Cash income from customer sales
- Collection of receivables
- Sale of assets
- Tax refunds
As money goes out of your business earlier and faster than it comes in, managing and planning your cash flow is vital in ensuring your business is never short of funds while you’re trying to grow. Chris Rhodes from Accelerus, the performance improvement specialists, adds some insight to the issue of finance when it comes to growth and developing a strong growth plan.
Business owners need “a complete understanding of the company’s finances, the ability to forecast accurately, sufficient working capital to fund the forecasted growth and adequate cash head room to meet unexpected events. Plus strong rigour in managing cash throughout the growth curve.” It’s a hands-on process, but managing your cash flow is a good way to break down what you have to work with and then make plans for the future.
Our recent survey revealed that 27% of SME owners said that managing cash flow was one of their biggest challenges when growing their business.
Managing your working capital and the timing cycle between debtors, stock and creditors is key. It can help to ensure the growth of your business – which will hopefully be profitable – doesn’t use up more cash than is available through increased debt. If this cycle isn’t managed carefully it can quickly put a strain on your cash resources.
Using a monthly, or even weekly, cash flow plan is key to ensuring you keep on top of your finances. It’ll allow you to identify any potential areas where cash may be stretched, and help you to plan accordingly to meet the demands of your business.
So what should you include in your cash flow plan?
Put simply, it needs to detail your cash in and your cash out. It’s important to record when the cash is actually received, to build an accurate picture of your position on a monthly or weekly basis.
Your plan can be broken down into the following sections:
This can be a quick and easy way to help provide your business with the boost it needs to grow. You can agree a set amount with your lender and work out a structured repayment plan so you’ll know how much you’ll be repaying each month.Apply for a Business
Depending on your business needs, there are various government lending initiatives available to you. The government website is a great place to find out what these are and check if you’re eligible.
This is when large numbers of people each contribute a small amount of money to your business. Typically done online, you set up a donation page through a crowdfunding platform and get donations through it. Successful crowdfunding requires you to pitch your business effectively. Including a compelling summary of your business and explaining why you need the funding and how the money will be used is vital. Many businesses offer incentives for people to donate, such as a free product, discount, or a piece of promotional merchandise.
Selling equity in your business can generate a significant amount of cash, however it means you’re giving away a portion of your business and associated profits. This is also known as equity finance and means you pay out dividends to your investors.
This can be a lower interest alternative, however it’s beneficial to still confirm the terms of your loan agreement in writing, to ensure you’re all on the same page.