How often do clients come to you at the very last moment stating: “We have a cash flow problem and don’t know what to do”?

Even solid businesses can experience cash flow problems from time to time. Cash flow problems can result from:

• Unexpected large orders that need financing
• Unexpected bills

And more and more often in this current economic climate:

• Customers taking longer to pay.

If a business is suffering from a bottleneck in its cash flow, then it is vital that it takes steps early on to resolve it. The reason? Cash shortfalls in a business can make traditional lenders nervous. As a result business financing options are reduced.

So what are the early warning signs? It may be that your client:

• Is taking longer to pay its bills.
• Is struggling to meet HP/lease repayments
• Has rent arrears or cannot pay its VAT bill.
• Is complaining: ‘The bank is restricting my business, just when I need it the most!

All of these are signs of cash flow problems. And all of them, if recognised early enough, can be dealt with and resolved.

So what can you do if you suspect that your client is suffering from cash flow problems? 

The first steps are to:

  1. Ensure that your client has a robust credit management system in place and is aggressively managing its accounts receivables.
  2. Review your client’s existing finance facilities to determine whether they are actually meeting your client’s needs.
  3. Take an in depth look at your client’s business and the sector in which it operates. What alternative avenues/business financing options can you client explore to generate cash/improve liquidity?

It may be the case that your client could obtain a business advantage by refinancing.

There are many sources of business finance in the market today.

If you do not know where to look for them, then it may be worth your while talking to a Business Finance Broker who will have access to a comprehensive range of financing facilities, to suit businesses, whatever their size.