How to unlock cash from your balance sheet

It is important for businesses, especially during uncertain times to be access cash. Although liquidity may be squeezed during these times, here are some measures that can be put in place to unlock cash from your balance sheet and minimise the negative effect on cash flow.

Plan in Advance 

As with anything in business, planning is key. Having a thorough understanding of your cash flow, not only during good times but also during challenging times is vital. Having this understanding allows you to plan ahead for uncertain times and have factors in place to overcome potential hurdles. Keep your cash flow forecast up to date and especially pay close attention to your list of debtors.

Stay in touch with your clients

Wherever possible, stay in close contact with your clients and customers. Find out how they are getting on and figure out if there is going to be any potential problems with them paying what they owe you. During uncertain times, other businesses may be struggling as well, so it is important to understand what position they are in. Not only does staying in touch give you a better financial picture, but regular communication can also help strengthen your relationship with your clients.

Be clear with clients 

When contacting your clients, ensure you remain as clear as possible to avoid any miscommunication. Timing is key, especially during times of uncertainty. If you are providing the same service and invoicing regularly, then you should be paid on time. Of course, there may be delays in payments at times. However, keeping on top of invoicing allows you to keep up to date with this and try and limit its impact.  If delayed payments are a regular occurrence, then it could have a knock-on effect on the rest of the supply chain and could end up with you struggling to pay your own creditors on time.

Be firm but fair with debtors

When talking to your clients and chasing up debtors, it’s important to be both fair yet firm. Regularly talking to them can help a potential situation getting out of hand. During uncertain times, your debtors may be struggling.  When this happens, you may want to consider introducing some flexibility.  If you decide to go down this route, then you should start by offering this flexibility to your most trusted clients first.

If you have a good grasp of your financial situation, then this also will put you in a great position to spot issues early and potentially even sort out alternative repayment schedules with some of your debtors. You could offer early-bird discounts to trustworthy or new customers and tighten credit policies where possible. However, you need to find a careful balance as if you are too strict, this could negatively impact your reputation and even lead to loss of customers.

Try to get a deal with suppliers

Where possible, talk to suppliers to discuss whether there are any discounts you can take get. If this is not available, discuss whether you can sort out a delayed payment schedule. Again, relationships are key here so be careful who you approach first. Try and get deals with suppliers who you have been working with for a long time. They will know that you are reliable and will be more likely to offer a flexible payment scheme.

Inventory 

Looking at all your expenses is a great exercise to do on a regular basis. Monitor whether you are paying the best price or whether you need the goods or service at all. Having an analytical eye on these things can have a big impact.

Uncertain times can have a severe impact on cash flow. However, these tips are just some of the actions a business can take in order to reduce this impact as much as possible. Our team are here to help you, especially during these unprecedented times. Call us on 0845 880 5678 or email us on website@wrightvigar.co.uk