Many businesses encounter cash flow difficulties every year, particularly during growth phases when expenses often rise faster than revenue. There’s a need for effective cash flow management and securing additional funding during challenging times.

Start with a cash flow forecast

A detailed cash flow forecast can help you pinpoint when you might run out of cash and identify the funding you’ll need to bridge the gap. Testing different scenarios, such as pricing adjustments or cost reductions, can also help you determine how to extend your cash runway.

Complete our cashflow forecast template to determine when you’ll run out of cash or use your accounting software cash forecast function.

We provide a comprehensive cashflow forecasting service to help you anticipate shortfalls, manage growth, and make informed decisions with confidence.

Sell anything not bolted down

Before seeking external funding, explore opportunities to free up cash from within your business.

Review your balance sheet for assets you no longer need. This could include surplus inventory, unused machinery, or vehicles. Selling and leasing back essential equipment can also free up cash.

Secure external funding

If internal measures aren’t enough, consider these external funding options:

• A business term loan, line of credit, or overdraft can provide the cash you need to weather tough times. Talk to us about our business loan options.
• Refinancing existing loans can help lower monthly payments by extending terms or consolidating high-interest debt into a longer-term loan. Using business assets as collateral might also unlock additional funds.

Tighten your cash cycle

Improving how quickly cash flows through your business can make a significant difference:

• Ask customers to pay by credit card or set up automatic payments for recurring invoices. You’ll get paid faster, reducing the time it takes for funds to reach your business and helping to prevent overdue invoices. Offering convenient payment methods like credit cards or direct debits can speed up the payment process.
• Require deposits or progress payments for large projects. For larger contracts or projects, requiring upfront deposits or milestone payments means you’ll have cash on hand to cover initial expenses and reduce the risk of delayed payments.
• Perform credit checks on new customers and set strict payment terms. Protect your business by assessing the creditworthiness of new customers before offering extended payment terms. Implement clear payment terms, such as 30 days, and charge interest on overdue payments.
• Add online payment options to your invoices to encourage faster transactions. Platforms like PayPal, Stripe, or bank transfers can make it easier for customers to pay instantly, ensuring quicker cash flow into your business.

The faster you can turn your sales into cash, the more effectively you can manage operating costs and reinvest in your business.

Exploring investor funding and tapping family and friends

If your business is facing cash shortages due to growth opportunities or the need for additional resources, raising capital from investors could be a viable solution.

Working with a professional advisor is highly recommended to help you navigate the process properly and protect your business interests.

If external funding options are limited or not feasible, tapping into personal networks could be a last resort. You may consider borrowing from family, friends, or business colleagues, but it’s important to approach this carefully. Be sure to clearly document the terms of the agreement to avoid misunderstandings and preserve relationships. Treat this as a temporary measure and make sure both sides are clear on expectations to maintain trust and avoid any potential strain.

Finding cash to keep your business afloat can be challenging, but with careful planning and the right strategies, you can meet the challenges of growth or tough times. Start by maximizing internal resources, exploring funding options, and tightening your cash flow. These steps can help you build a stronger, more resilient business.