2019 September

September 25, 2019

There is plenty in the news at the moment around the negative effects on the economy due to the uncertainty caused by Brexit and the wider world wide trade wars going on between China and the US.

Uncertainty can cause Businesses to halt or slow down their plans for investment, in turn reducing their own abilities to capture additional profits at the same time.

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Here are our TOP 5 tips that you can build into your Business to make sure you can weather any potential financial storms that lie ahead.

1.      Plan your cash flow

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Do you know how much working capital your Business needs to operate on a day to day basis, and can you withstand say 20% of your customers not paying you on time?

Making sure that your Business has access to sufficient cash to meet its overheads will give you the confidence to take on orders and maximise profits knowing you will still be able to pay your bills on time.

You may be one of the fortunate few that has a positive cash flow and plenty of money sat in the Bank with which to fund your business, but it still pays to look ahead.

For Businesses that have limited cash in their Bank Accounts it is even more critical that they plan their finances well in advance. Only then can you be confident that you will have the funds in place to deliver your pipeline of work on time and keep your customers happy.

It is always advisable to work with your professional financial advisers to understand your cash flow needs, and apply for any additional credit that may be required in good time.

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2.       Minimise any Funding Gap

Can you balance your supplier payments against your planned customer receipts?

 If you can arrange with your customers and suppliers a payment structure that allows you to receive payment for goods sold ahead of the date you need to pay your suppliers for them, then this will help your Businesses cash flow to remain positive.

Many Businesses seek to take a deposit from their customers in stages, for example 25% on order. This may allow for initial labour costs towards the cost of producing any goods to be sold.

A further stage payment to cover the cost of materials required for the manufacturing process (depending upon supplier payment dates) may be needed ahead of delivery, with a balancing payment (usually representing the profit part of the sale) due on delivery or completion of the service provided.

3.       Keep on top of debt collection. 

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Being paid the money you are owed for work done promptly can make a huge positive impact on your cash flow.

Do you invoice your work as soon as you can?

Delays in sending invoices for work already done can create an additional and unnecessary ‘funding gap’ so keep your invoicing up to date.

Have a robust collections system in place. 

Among the top tips for speedy collection of outstanding debt is to be on first name terms with the person responsible for paying your bill.

A friendly call ahead of any due payment date will ensure that the customer has the opportunity to confirm they are in receipt of your invoice, and also that they don’t have any queries with the bill itself. It is an ideal time to confirm with them in a polite manner that payment will be made on the due date.

Monitor for receipt of payments when they are due. – If payment isn’t received on the due date, put a call in straight away to the customer to understand why payment hasn’t been made, and get a confirmation of when the funds will be received.

Don’t allow yourself to become your customers unpaid Bankers. If you don’t ask, you often don’t get as others will be shouting louder!

If you find that your customer is experiencing issues with paying their bill, you can make an informed choice of how to work with them to put an acceptable payment plan in place. You will also have the opportunity to look at the effect that this late payment will have on your own cash flow.

It can be useful to engage the services of a third party to assist you with the collection of your debt, and there are some excellent companies around who can do this for you without damaging the relationship that you have with your customer.

If you’d like an introduction to experts who can help, talk to us today if you would like an introduction to The Credit Protection Association.

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4.       Timing is everything

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Managing your production facilities to ensure as smooth a flow of work as possible will help you to keep your invoicing regular, and build a pipeline of payments from which you can plan your expenditure.

Any time delays between incurring cost and your ability to issue and collect your invoice will create an additional requirement for cash flow to pay your overheads and any staff.

Make sure that there is excellent communication between your Manufacturing floor and your finance team (if you have one) so that a real time understanding of cash flow is understood across the business.

5.      The right type of finance?

There are a multitude of different types of finance available. 

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Everything from funding working capital expenditure to fixed assets for your business will have a specific type of finance product available– things like buying equipment, machines or vehicles will be done through Asset Finance with repayments structured to the working life of the asset.

Property purchases will be secured by a legal charge in favour of a Commercial loan or Commercial Mortgage which will be repaid over a longer period of time up to 25 years.

Working capital requirements, paying for stock, expenses or staff ahead of your business being able to collect debts may be funded by a combination of Bank Loan, Overdraft or Invoice and Trade finance products.

Having the correct type of finance for your business can make sure that you have sufficient cash flow in place. For example, if you fund your working capital by way of a Bank overdraft, you may be limited by the level of security that the Bank has in place.

A Bank may lend up to 70% against bricks and mortar security, so for a £100K property charged a maximum facility may be capped at £70K.


Say you have invoices outstanding from your customers for £300K at any one time and need to pay your suppliers for goods received. Lets explore how different types of funding can limit or assist your cash flow.

Overdraft vs Invoice Finance

Using an Overdraft facility secured by a charge over a £100K property will release £70K (up to 70% LTV) unless the Bank will agree to an element of unsecured debt.

By using an Invoice finance facility which may release up to 90% of your debtors

£300K x 90% is £270K, some £200K more working capital available than with a Bank overdraft.

What could you do with that £200K?

If you would like to ensure that your Business has access to the funding it needs, why not talk to us today.  


Tel 01229 588077

Email finance@jfhornby.com