Posted by Stephen Welfare, Partner
‘Simple ideas to improve cash flow management’
Cash flow is one of the most important aspects of running any business irrespective of the size of the organisation. A problem with cash flow is one of the biggest factors in why many businesses fail – even those that are highly profitable. Surprisingly, it is often those businesses that are growing fast that experience difficulties as their increased cash requirements temporarily outstrip their outgoings.
Commercial lawyers can assist with improving cash flow in a number of ways – and before it is necessary to resort to litigation (for example, when pursuing non payment for goods and services). Royds Commercial department advises on the measures and practices to adopt, for example:
- Check out major contracts and key customers
- Run credit checks and ask for references on critical contracts
- Change your payment terms
- Modify your terms and conditions of business and alert your customers
- Clarify your commitment and expectations
- Ensure your contracts are specific enough to avoid misunderstandings and that the process for resolving any disputes swiftly and inexpensively is agreed
- Seek extended credit from your suppliers
- Read the terms and conditions of your suppliers and negotiate payment terms
- Carry less stock
- Install technology and systems for more effective stock control and to allow smaller quantities to be ordered on a more frequent basis
- Obtain expert help in developing accurate forecasting systems
- Speak to the bank
- Negotiate better terms for overdrafts and loans
- Release money tied up in property
- Consider a sale and lease back arrangement for some or all of your premises
- Lease equipment rather than buying it
- Review lease and hire purchase agreements carefully
- Change your staff structure
- Consider short term contracts and agency staff instead of full time employees
- Outsource activities and services that are not core to your business
- Chase Debts
- Develop an effective credit control system
Credit control systems
The late payment of invoices contributes significantly to poor cash flow and also causes problems with the cost of borrowing and thus reduces profits. Prevention is better than cure and the better your credit management system, the better the recovery of payment will be.
However efficient the credit management system is there will still be those customers that do not pay up when they should, so prompt action is required. It is a simple fact that the sooner a business acts to recover unpaid bills, the greater the prospect of getting paid. It is easy to set up a simple but robust credit control system, and if things need to progress, legal action should be taken.
Royds’ Dispute Resolution Department has a team of experienced litigators able to take decisive action to recover debts through the appropriate legal proceedings. Note that for debts in excess of £5,000 costs are recoverable, whereas costs for claims below this sum are not.
Minimise the impact with our dispute resolution solicitors