By spotting the early warning signs, you’ll be in a much stronger position to put things right.
For instance, if your cash flow difficulties are related to sales figures, then a first step is to trade your way out of the problem. If the resources are available, step up your sales and marketing. Sell more to existing customers and tap into new markets.
If the time delay between raising invoices and customers paying is causing cash flow problems, there are a few things you can try. You can:
- Tighten credit control. Make sure invoices are sent out on time. Chase payment when it becomes due
- Consider invoice discounting arrangements, where cash is lent to you by the bank as soon as an invoice is raised
- Keep track of the financial health of your customers and suppliers
- Change payment periods
If there’s no real chance of sales improving, then you can consider other measures. Free up cash by selling assets, reducing the number of employees, or reducing costs and/or inventory.