smallbusiness.co.uk: Helping your business think big

Having a steady cash flow is now more important than ever. Read the second part of guide to ensuring your business stays in the black

11. Consider asset-based lending

Split between asset finance, factoring and invoice discounting, commercial finance can be a useful tool to get cash flowing. Martin Bennison, MD of Bibby Financial Services, says that he has seen a ‘marked upturn in enquiries’ during the past few months. ‘We’ve seen it before in the late 80s and early 90s when the banks weren’t keen on putting money out the door, but there are still good businesses out there which you want to support.’Funds can be raised against business assets, such as plant machinery in a factory, or even stock. If you opt for invoice factoring, this allows the service provider to take on and collect your debt, paying around 85 per cent against the outstanding balance. A service fee is charged and the remaining 15 per cent is settled when the debtor has paid up.

12. Put people on stop

There can’t be many shops in the high street which allow customers to walk out with whatever has taken their fancy with the words, ‘I’ll pay you later.’ That’s effectively what businesses are doing when they continue to provide a service or supply a product without payment. So the solution, if only until they pay up, is to pull what you’re doing. ‘Don’t be afraid to put people on stop,’ states Bibby’s Bennison. ‘If they’re not paying you, then why are you doing the work?’

13. Tone at the top

Perks and incentives to ensure the company culture stays strong are one thing, but boozy lunches, luxury cars and trophy secretaries are another. Andrew Duncan, partner at Bridge Business Recovery, recalls being called into a company where a vendor-initiated management buy-out went belly-up because the new management team preferred to put pleasure before business. ‘The owner wanted to step back and sell the company to the management team. In theory, it was a sound idea but they were more bothered about playing golf and driving nice cars than making the company a success.’

14. Invest for the future

Scott Nursten, MD of security systems provider s2s, and his team have gone through a ‘process review meeting to assess every part of the business’. This isn’t to be confused with wielding the axe. Rather, it requires that you assess what’s surplus to requirements. ‘I’m looking at where the business can improve its performance and I will make investments if necessary so that jobs can be done quicker,’ says Nursten. This includes improving the food on offer for staff in the office kitchen. ‘I’ve now increased the amount and variety of food and I’ve done that purely to keep people in the office longer. They have everything they need here so I’m saying: “Don’t take your lunch break [outside] as I need you here working.”’

15. Take out insurance

If there is a make-or-break payment for your company, it could be worth seeking insurance against late payment (usually longer than six months) or a customer going into administration. This can be offered as a form of protection when going for an asset-based lending package as well.

16. Work smarter

Redundancies aside, you can try to reduce the amount of hours staff work or have shutdown periods between big orders. Technology also has a role to play. Mark Hall, managing director of media agency The Big Oxford Computer Company, uses a web-conferencing application to conduct more meetings online. ‘We’ve used the product since July and have saved a considerable amount on travel; plus, we get regular feedback from clients as we can be more collaborative on projects.’

17. Tread carefully

The mood is such that some companies will be firing county court judgments (CCJs) off at the first opportunity. For Nursten at s2s, it’s better to try and understand the customer’s situation and work at a solution, such as a series of part payments. ‘People can be too quick to raise a CCJ,’ he says, although he accepts there comes a point when legal action must be taken. ‘There will be a last resort and then you have to go to the debt collection agency and let them do their thing.’

18. Keep the bank informed

Forget the friendly ads that used to fill TV screens. Banks, which have always been the most profit-centric of organisations, are taking no prisoners when it comes to loans
and overdrafts. You need to demonstrate that you are close to the numbers and understand your cash flow. Trevor Nobbs, associate director of Barclays’ business support team, says: ‘It never ceases to amaze me the number of businesses which seem to almost think they do not need to produce much in the way of management information, or that it is [solely] produced to keep the bank happy.’

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