In the latest Business Finance Bulletin Rob Warlow from Business Loan Services discusses more emerging evidence from Bibby Financial Services and the Federation of Small Businesses of a dip in confidence amongst SMEs. Are we in for a rough ride in 2016?

If you’re a heavy user of fuel and may be struggling to get a commercial credit card because of a poor credit record then Rob shares a new solution which can also reduce your administration burden.

More news about the on-going problem with late payment. Rob shares a recent survey which highlights how much money is trapped in late payment and so holding back growth in the economy.

In the Business Finance Tip of the Week… when it comes to the production of Management Accounts, delegate but don’t abdicate.

If you prefer to listen to the podcast version you can click below or download to listen to later via our Soundcloud, Stitcher or itunes channel.

Poor cashflow is a constant headache for most business owners. In my conversations with business owners a common theme emerging is the day-to-day struggle of chasing outstanding payments and juggling creditors who themselves are pressing for payment.

Whilst you may be doing everything you can to encourage debtors to pay what do you do if your creditors are putting equal if not more pressure on you to pay up and your bank won’t help?

Here are four steps you can take.

Step 1: Assess Where You Are Now

If the pressure is on there is a high probability you have lost sight of the extent of your problem. When you are constantly bombarded with phone calls and letters it’s too easy to ignore the situation in the hope it will go away. But this is not the time to bury your head in the sand.

Part of the key to successful cashflow management is knowing exactly where you stand. Forewarned is forearmed.

So your first task is to write down precisely how much you owe and to whom. If your bookkeeping system is set up around stacking invoices in the corner of your office, or leaving them languishing in your email in-box, access them out and list them one by one with names, amounts and dates due.

Acknowledging and accepting the extent of the problem is an essential first step.

Step Two: Prioritise Your Payments

Having written a list of payments due the next step is to prioritise them. In prioritising the list you are aiming to classify them into three categories:

1. Business critical payments which have to be made under any circumstances. These are payments which would put your business at risk if not processed

2. Creditors who would be content with a part payment

3. Non-critical creditors who could wait and not cause you major disruption if not paid

Step Three: Communicate, Communicate, Communicate

In times of a cash-crunch it’s too easy to ignore the situation you’re in but in not communicating you will only compound the problem. Now you have your list the next step is to get in touch and inform each of them as to what is happening and to communicate your message or request.

Put yourself in your creditor’s shoes; what would you think if you were expecting payments by a certain date and had planned your cashflow position accordingly but no payment was received? Not impressed I guess. So why should it be any different if you are the one delaying payment?

By communicating your intentions you will be preserving and in some instances potentially strengthening relationships with your suppliers.

Step Four: Check Your Cash Position Daily

Now you know where you stand you can move ahead more confidently. From now on it’s all about monitoring the cash position in your bank account on a daily basis. You are checking to see who has paid you, what cheques have cleared and, referring to your payment schedule, which creditors you can pay as per the agreements you have made.

Once you have made a payment, follow step three and communicate … call to tell them their payment is on its way.

Continued communication is the key.

Follow these steps and you will be in a better position to handle any cashflow crisis you may be experiencing.

Poor cashflow is one of the main reasons why businesses approach banks for finance. Typically they request an overdraft facility in order to bridge the gap between the payments they need to make to creditors and receiving payments from their clients.

But in some cases a cashflow crunch can simply be caused by poor administration.

We have talked previously on this blog about how systems and processes in terms of managing late payments is important and yet a recent survey has thrown up another reason… forgetting to invoice in the first place!

After all, you can’t chase invoices you’ve not issued!

According to a survey carried out by business and finance software provider Exact , out of the 450 SMEs which participated, 20% admitted to forgetting to invoice for services or goods at least once. The study also found that approximately 12% of the invoices were worth between £5,000 and £10,000, while six per cent were for services or goods worth more than £10,000.

So if you are suffering from strained cashflow don’t automatically go running to the bank, check you have invoiced for every order and of course chase those that are overdue.