Does your business suffer from strains on working capital? Tips on managing cashflow

29 July


Managing cashflow is the lifeblood of a small business, and it is imperative that when work comes in, there is the operating revenue to complete the job. But for many companies, the steady drip of money to pay for everyday office supplies and stock means that they have to dip into a business overdraft, incurring fees that take a chunk out of profit margins.

Take Kameela, an office manager. She runs a tight ship and uses a company debit card to source supplies for the office, to buy stock and pay suppliers. But there’s a fundamental problem the company needs to address.

If a company uses the same source of funds to pay for employee expenses, regular business running costs AND bigger investment outlays, it can be hard to track and even harder to maintain a healthy and cost effective cashflow position.

According to insight by Allstar Business Solutions into the concerns of 1,000 SMEs [1], more than 50% feel that worries about balancing cash flow “keeps them up at night”, with 41% saying that coping with a long payment pipeline can often pile on the pressure too.

Five simple ways to avoid cashflow pressures

1. Remove your reliance on cash

A cash reserve can provide a reliable cushion to manage unexpected costs but for many businesses big and small, it’s not always possible to build it up. If your business finds it’s constantly battling with unexpected urgent costs that force you into an overdraft, consider adding a credit-based solution.

2. Get the best mix of funding for your business

There are lots of ways to manage business finance. The issue with a business overdraft is that it can be comparatively costly and inflexible. By putting in place a credit line covering employee expenses and other day-to-day running costs, you can better manage cashflow and help keep larger capital funded solutions separate.

3. Pay and reclaim may ease short term pain but hurt in the long term

Shifting the burden of funding working capital onto employees by asking them to pay and reclaim on company expenses may look good initially for the P&L account but it can have negative effects on staff and their productivity. In our research [2], 57% of employees surveyed have endured financial hardship after shelling out for on the road work expenses and 26% revealed they have actually decided to change job as a result of their employers’ expense policy. Hidden costs of recruitment will have a big impact over the long term.

4. Negotiate and consolidate terms

Look at your payment terms, what you buy, and where. This will allow you to negotiate with suppliers, perhaps consolidate purchasing and also check that the prices quoted are still the ones you are getting. And it may sound obvious; get into the habit of sending invoices for payment quickly or perhaps consider asking for part-payment during a project. Be direct, polite and fair with your clients.

5. Get a clear picture

Many companies don’t have a clear idea of what they spend on office supplies and day-to-day expenditure. Your cash flow is only as good as your accounting and reporting so consider whether you have the right software and expense management in place to provide your business with a picture of expenditure and areas for improvement.

How Allstar Plus can help

By using a business credit card such as Allstar Plus, with an interest-free repayment period of up to 44 days, you can manage your business’ cashflow and consolidate everyday costs into a regular and more transparent payment.

It also helps businesses replace less efficient processes such as pay and reclaim by giving control at card level over what is spent and by whom, empowering employees to get on with their roles without needing to worry about funding expenses.

Allstar Plus includes deep insight and reporting on all your lines of expense, laying out clearly what is being bought and by whom, and when, allowing you to understand exactly where spending could be more efficient.

Find out more about what Allstar Business Solutions can do for your business’s expenses process.

[1] Research for Allstar Business Solutions conducted by Charterhouse in March 2019 of 1,000 SMEs

[2] Research for Allstar Business Solutions conducted by Censuswide in September 2018 of 1,002 SME employees

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