7 Tips For Keeping Your Business Financially Resilient

05 September 2016

In good times, cash is king for businesses looking to invest for growth. 

As a result of the banking crisis a few years ago, many profitable businesses reduced their debt and built up cash reserves. Roll forward to today - those cash reserves may have taken a severe dent due to the dramatic fall in the oil price and the knock on effect this has had for many.

For those businesses, cash once more is king but for very different reasons i.e. survival! How can your business stay financially resilient in the tough times ahead?

1. Manage your working capital cycle effectively

Paper profits are just that; focus on monitoring how your business performs in cash terms.

Dedicate an employee to credit control or use technology to automate the credit control process.

Look at alternative ways of financing your business such as invoice discounting.

Consider offering customers incentives to pay early and charging customers interest on overdue amounts.

2. Manage key relationships with customers and suppliers

On the customer side, assess who you are currently doing business with. Are they a credit risk? How long on average do they take to pay you? Should you allocate time and resources to customers who continually breach your terms and conditions?

Don’t rely on one customer – try to spread the risk of a single customer turning into a bad debt.

Provide a good service and your customers are less likely to dispute the invoice. Disputed invoices always take longer to settle.

On the supplier side, know your current terms with your suppliers and try renegotiating more favourable terms to help with cost savings.

Are there more cost effective suppliers which don’t compromise service or quality?

3. Prepare short term financial projections

These will help identify future cashflow requirements. Sensitise the financial projections for “what-ifs”, monitor actual versus forecast and be prepared to act quickly if not in line with your forecast.

4. Prepare regular management accounts

Management information will help identify poor performing projects, divisions or products and help to keep an eye on overheads which could be reduced or cost savings you can make.

5. Get close to your bank relationship manager

Your bank Relationship Manager won’t like surprises and is more likely to renew or amend your facilities if kept informed of the business’s performance.

Check your lending terms and conditions – don’t incur costly penalties for late delivery of Management Accounts.

6. Use technology to make managing business finances easier

Cloud accounting software is making it easier for business owners to understand and keep on top of the business’s finances, shortening the time it takes to get a sales invoice to the customer and hence increasing cash collection. They also make it easier for your accountant to collaborate with you.

7. Ask your accountant for advice

After all, that’s what we’re here for. We'd love to hear from you.

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