Tackling cash flow issues
Tackling cash flow issues
Many successful businesses have run into problems due to cash flow issues, think of Pollypeck and more recently Carillion. Managing a positive cash flow is an important task and as the credit crunch demonstrated a business can’t guarantee to borrow money just when they need it.
Here are some tips and steps every business can take to keep cash flow positive.
Credit score your customers – I have used many different services to monitor credit ratings – creditsafe is a good option and there are even free services popping up which may be worth using in the future. If you watch carefully your customers you should be able to reduce the risk of a bad debt, if you do have a lot of your eggs in a single basket then taking out credit insurance is a good option. Bad debts are painful, hit cash flow and always dent profitability due to unexpected drops in sales.  Reporting Accounts is a free service with credit reports available on a pay as you go basis, they have been developing their functionality over the last couple of years.  We did some work for them recently helping them obtain HMRC clearance for an SEIS share offer they are shortly planning for.
Regularly challenge your costs – I try to spend time each month digging into different P&L codes and considering could this be done differently?, cheaper? or avoided at all? A good example is one from a recent client, they had been using their own bank RBS to make foreign currency payments, these had grown over time from ocassional to several times per week, I introduced them to Transferwise which saved them around 0.25% on each transaction which with an average of $6,000 weekly saved £150 per week or £7,800 per year.
Bring in a Part-Time Finance Director or work with a Portfolio Finance Director – A good FD pays for themselves, both in good advice and in better financial planning, it is surprising how small savings build up and turn into larger ones. Often a growing SME needs an FD but because of the costs involved and the scale of their business they are reluctant to hire one, and not attractive to the FD at that stage either, hiring a part time or portfolio FD solves these problems, a high calibre Finance Director at a fraction of the cost. Here at FD Capital we are experts at FD and CFO Recruitment, we don’t just recruit Finance Directors we offer a range of niche specialisms.
Cash flow
To get an understanding of the areas we cover please visit the following pages to see the disciplines currently on offer:-
- Part Time FD’s – This is our main focus covering the London and West Midlands areas.
- Portfolio FD’s – Part Time FD’s who work for multiple businesses.
- Private Equity FD’s – Finance Directors with experience of working with Private Equity Houses and Venture Capitalists.
- Interim FD’s – Finance Directors needed for short periods.
- Turnaround FD’s – Finance Directors with particular experience of distressed situations and turnarounds.
- E-Commerce FD – Finance Directors with expertise with E-Commerce website and Search marketing.
- Non-Executive FD – Non Executives or NED’s with finance expertise for boards.
Planning ahead – If your business has a rolling annual forecast model complete with Profit and Loss Account, Balance Sheet, Cash flow and Cashflow Available for Debt Service (CFADS) then you are in a good place to work with lenders ahead of time and to raise debt and equity, than if you are caught with a suddent short term cash flow issue which are usually more expensive to finance and get out of. Your FD should have contacts with Finance House, so it is worth spending time developing these relationships so they can be drawn upon when the time comes.
Improve sales and margins – A detailed review of contract profitability often reveals that 80% of the profit comes from 20% of the customers and 80% of issues from a different 20%. By understanding your real profitability a business can manage price increases better so problem customers pay more to cover their maintenance. There is no such thing as bad freight only bad rates which is what one of my old bosses used to say, and the adage is a good one, customers are always good if they pay enough and often the vocal ones manage to get away without paying their way.
Just the process and discipline of studying your customer and product profitability helps to bring scrutiny, if the operation team knows contracts are being monitored then costs are more likely to be controlled. Hold regular meetings with the managers concerned and challenge them to improve the profitability of the less profitable customers. Sometimes it makes sense to discard unprofitable work and redeploy the resource saved to service new more profitable customers.  If your resources are limited it makes sense to focus them better on the retention of the best customers.  Putting up the rate for the lower profit ones can also make sense as it can them make them more viable if they are paying enough.
If you need a part-time Finance Director or Portfolio FD then reach out to us today we always have FD’s on our books ready to help and if not we can always source great candidates quickly. You’ll soon find that a good FD can and will do all the above and so much more!
Our main locations at present are
Part-Time London FD’s   We cover all of the areas within the M25 and the Home Counties.
Part-Time Birmingham FD’s We cover Birmingham and the West Midlands, Shropshire and Cheshire.
It is always worth talking with us if you have a need for a role outside of those areas or you are candidate that doesn’t mind commuting or staying away some nights per week.
From time to time we have roles for FD’s that we can’t handle within our network, keep an eye on our Jobs page as we advertise roles there regularly.
If you are thinking of a career as a Part-Time FD or CFO, why not give us a call? We are always happy to chat over options and share some tips and advice along the way.
Adrian Lawrence FCA with over 25 years of experience as a finance leader and a Chartered Accountant, BSc graduate from Queen Mary College, University of London.
I help my clients achieve their growth and success goals by delivering value and results in areas such as Financial Modelling, Finance Raising, M&A, Due Diligence, cash flow management, and reporting. I am passionate about supporting SMEs and entrepreneurs with reliable and professional Chief Financial Officer or Finance Director services.
