From overdue invoices to staying on top of bills, it is estimated that one in four companies in the UK struggle with cash flow at some point, with as many as 61% having issues on a regular basis.
The result can be very harrowing for a business, which means that they hold back on other important things that are needed for the company’s growth – and worst of all, other suppliers and staff members get paid late which is not good for productivity or overall morale.
But below are some of the most common ways to improve cash flow for a business and some innovative ways too.
Clear invoice terms
One of the most simple things you can do with your clients is have clear invoice terms included in your contracts. Whether you sell a product or a service, making payment terms very clear is essential to getting paid on time, such as 30 days or 60 day periods.
Depending on your business, you can also ask for deposits or partial payment upfront and this can be very common for certain industries such as agency work, construction, catering and more.
To make sure that invoices are paid smoothly, it is always worth being in touch directly with the person responsible for paying invoices, rather than allowing a member of staff to pass this onto the accounts team. If you have direct contact with someone from the accounts department, you can always ensure that they have the right information about your and your bank information and also just send a little reminder before payment is due, just to ensure that things run smoothly.
Business loans
Business loans are very common and exist in many shapes and forms. A business loan can be unsecured or secured against assets, invoices, credit overdrafts, facilities and more.
The rates for business loans can be very affordable, with Lending Expert offering rates from 2.6% APR.
Every loan will be different and some are better for those businesses who are starting out and some products may require a minimum turnover and at least two years of trading.
Think carefully about how much you need to borrow and how long for. You want to avoid overborrowing since this can result in just paying off more interest – and you want to have the flexibility to pay off early or top up if you ever need to.
Using credit cards to pay staff
Staff overheads can be the highest cost for some businesses and if you run a small company, you can find ways to pay staff each month using a credit card. This can give you an extra 30 days to pay off the finance and be completely interest-free – helping you stay on top of cash flow and avoid getting overwhelmed by costs.
Whether you use Paypal, Wise, Curve or Capital on Tap, there are some effective ways to pay off staff using credit and there are ways to earn points, miles and other rewards too – and for the employee, there is no difference once it enters their bank account!
Analysing your staff and office requirements
Covid has made business owners think carefully about their staff and office requirements, with people realising the potential savings from freelancers and remote working.
Whilst having a physical office and staff members working 5 days per week is very traditional, companies today are realising that this does not necessarily need to be the case.
Post pandemic, some businesses have realised that they do not even need an office, which creates a huge saving for companies, with the average firm spending around £500 per person on a desk each month, based on figures in London.
In addition, whilst having a job for 5 days a week is considered the ‘norm,’ there is a strong business case to work with freelancers or have your staff working only 3 or 4 days per week.
By truly assessing your staff and office needs, this can massively open up cash flow for you and your business.