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Identifying cashflow problems

Try to anticipate cashflow problems before they happen. You can do this by:

  • planning ahead using cashflow forecasts
  • arranging alternative sources of finance
  • monitoring market conditions
  • keeping an eye out for signs of customers or suppliers in trouble
  • taking action as soon as you see a problem

Cashflow problems caused by external factors

The factors that affect your cashflow are sometimes beyond your control. You must still understand and take account of them.

Examples of this include:

  • customers or suppliers going out of business
  • consumers having less money to spend
  • VAT, inflation or interest rate changes
  • changes to market conditions, caused, for example, by new competitors
  • availability of loan finance and overdrafts
  • new legislation in your sector
  • government fiscal policy

The risk of non-payment

Try to spot the warning signs of non-payment (such as evasive behaviour or excessive invoice queries). You should have a contingency plan in place and use a credit agency to credit-check new customers.

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What to do if you have a cashflow problem

If you have a cashflow problem, it's important you act immediately. You may be able to find a solution internally. For example, by:

  • revising business practices
  • cutting costs
  • taking on more orders

You could seek specialist advice (from your accountant, investor or a business mentor). It helps to have a good relationship with your bank and other lenders. When working with them, you should:

  • share your cashflow and other business forecasts with them
  • break bad news promptly
  • explain what you're doing to solve the problem
  • not make unrealistic promises

Short-term finance

You could consider:

  • non-bank lenders
  • financing from family and friends

Find other ways to fund your business.

Don't use loan sharks or unregulated loan providers. Only deal with banks or building societies that are regulated by the Financial Conduct Authority (or 'FCA'). You should always:

  • get several written quotes for comparison
  • get an accountant's advice
  • check if your bank can offer better terms
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