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What to do if your company is experiencing cash flow worries

It’s worrying when your business experiences cash flow problems, and important to take action quickly to avoid a slide into insolvency. Cash flow insolvency means there’s insufficient cash available to pay day-to-day bills as they become due.

If your business does enter insolvency, by law you must cease trading and seek professional assistance from a licensed IP, but obtaining expert help early on offers you more chance of averting insolvency and potential liquidation.

So what can cause cash flow problems for a business, and how can you deal with them successfully?

What causes cash flow issues for businesses?

Running a successful business is a complex process, and fortunes can change very quickly. It’s imperative to keep a close eye on cash and to take steps to rectify any shortfalls as soon as they become apparent.

So what might create a cash flow problem for your business?

Losing a high value customer

It only takes the loss of one valuable customer to plunge a business into financial decline. Furthermore, finding new customers takes time and money so you cannot always rely on this to improve cash flow.

Poor debt collection procedures

Collecting in the debts that are owed to you in a reliable and effective way is vital to success. If you don’t invoice as soon as you’ve completed work, or you allow customers to fall into arrears without taking any action, cash flow issues will quickly mount up.

Decrease in sales

Maybe a slump in the market has created financial problems for the business, or your sales team has missed opportunities to attract new clients. Maintaining a high level of sales is fundamental to good financial health, and any decrease needs to be addressed quickly.

These are just a few of the reasons why businesses experience cash flow problems, so is there anything you can do to improve the situation and get the company back on track financially?

Worried about your Bounce Back Loan?

If you are a limited company director worried about how you are going to repay your Bounce Back Loan, we are here to help. As licensed insolvency practitioners we can talk you through your options when it comes to repaying your outstanding Bounce Back Loan, as well as handling all negotiations with creditors on your behalf. Call our team today on 0800 063 9262 .

How to deal with business cash flow problems

Contact an insolvency specialist

Seeking early advice from a licensed insolvency practitioner is the best way to deal with unhealthy cash flow in your business. The sooner you act the more likely you are to have a number of potential solutions available to you.

Project your cash flow needs

Cash flow forecasts allow you to pre-empt shortfalls in the weeks and months ahead. They provide a clear picture of your cash needs, taking account of all monies due in and those due out in the near future.

Prioritise invoicing and debt collection

Good invoicing and credit control procedures support healthy cash flow and can allow you to operate your business without fear of insolvency. Invoice as soon as you’ve completed any work and chase up late payments straight away - you can also charge interest on overdue amounts.

Additional funding

Invoice finance and asset finance are just two forms of alternative funding that boost cash flow and support businesses in the long-term.

Cash flow problems can quickly lead to insolvency

When you cannot afford to pay the business’ day-to-day bills it’s likely that you’re cash flow insolvent. This means you must stop trading and seek assistance from a licensed insolvency practitioner, but it doesn’t necessarily result in business closure.

Although liquidation is certainly possible in this scenario, there are other formal insolvency measures and actions you can take that can save the business. Here are just a few:

  • Company Voluntary Arrangement (CVA): CVAs are designed to help viable companies recover their financial footing and improve cash flow by formally restructuring debts.
  • Company administration: if you fear that a creditor might try to wind up the company, administration provides a valuable moratorium that protects the business and allows for a defined plan to be formulated.
  • Creditors’ Voluntary Liquidation (CVL): if there’s no alternative to liquidation, CVL enables you to fulfil your legal obligations and may also entitle you to claim director redundancy pay.

Seeking professional advice on cash flow problems at an early stage is vital to protect your business from closure. UK Liquidators are insolvency specialists and can provide the reliable independent advice you need. Please get in touch with us to arrange a free, same-day consultation – we operate a broad network of offices nationwide.

Jonathan Munnery
Insolvency & Restructuring Expert

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