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Company Cash Flow

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Understanding your Business’s cash flow can greatly improve your business.


If you run out of cash you will be unable to make payments to suppliers, employees and H M Revenue & Customs and they may take action against the Company as a consequence.


No business can survive without enough cash to meet its immediate needs, regardless of whether the Company has healthy order books and profit margins.


A positive cash flow occurs when a business receives more money than it is spending, enabling it to pay bills as and when they fall due.


A negative cash flow means the business is receiving less cash than it is spending. It may struggle to pay bills on time and need to borrow money to cover any shortfall.


In order to know what’s coming in and going out, it is essential that you produce a regular cash flow forecast. This should be updated and reviewed and will provide an insight into the financial position of the Company.



Healthy cash flow requires an efficient invoicing system. You should look to invoice promptly after supplying goods or services, and ensure that all the required information is included in the invoice as any mistakes will delay payment.



A sale is only complete once full payment has been received. We would encourage you to follow up overdue invoices as soon as the agreed payment date has been missed. You could consider contacting a customer before the due date to check payment is on its way. If a customer frequently makes late payments you will need to assess whether or not to continue supplying them.



As well as chasing money coming in to the business, effective cash flow management requires delays in cash going out. Scrutinise all costs to find ways of minimising them and push creditors’ terms of payment back as far as possible.


Payment terms

Your cash flow will be put under significant pressure if you don’t get paid when you’re expecting to for goods or services provided. Be sure to agree, in writing, terms of payment with your customers prior to providing any goods or services and run a credit check on any new customers.



Finance and invoice factoring can offer your business a breathing space if you have a cash shortfall. Where you would usually have to wait weeks or months to collect on an invoice, factoring would allow you to receive partial payment (usually 85%) now whilst they work to collect the full amount. There is a cost involved in factoring and these should be fully understood before agreeing to any arrangement.


How F A Simms & Partners Can help


At F A Simms & Partners we work to identify the source of the cash flow problems and explore all of the options to eliminate any issues. There are many business rescue options that can help a company turn around and provide cash flow solutions rather than entering full closure liquidation.

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