Currently, the most significant problem your company will encounter is a decrease in cash flow. The expression that “cash flow is the lifeblood of your business” has never been more accurate.
Businesses that evaluate and prepare their money promptly will be in a better position. This blog offers practical guidance to business owners on how to increase cash flow.
Keeping track of your current situation
Recognising your situation
We live in unusual times, with no firm sign of when the trade will resume back to normality. Anything just under three months’ worth of cash on hand requires quick attention.
- How many invoices are still unpaid? What are they worth?
- The total amount of money in your bank account(s)?
- What are the invoices you haven’t raised, and how much are they worth?
- Your pipeline status right now? What is the estimated invoice amount?
Knowing how much money you have coming in and going out is essential
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Assess all your expenses, including rent, wages, bank loans, fees and charges, advertising expenditures, and subscriptions.
- Make contact with your customers to ensure that you maintain a business relationship throughout. Get confirmation of when you may anticipate payment.
- Examine your financial obligations, such as hire purchase, leasing, and loan payments. Speak with your lender about a payment holiday; they may be able to help.
- Purchases should be made on a credit card whenever feasible to maximise repayment days.
- Contact suppliers and landlords to see if you can work out extended payment terms or even payment vacations until business picks back up.
- Analyse your funding alternatives.
Examining your procedures
- How many days do you have left on your debtor’s list? What can you do to make this process more efficient?
- How quickly do you get credit decisions?
- What will happen to your operations if you have to reduce or cancel a subscription that is critical to the placement chain?
- Your methods to make your organisation more efficient in terms of marketing and selling your service? Is it possible to outsource parts of your back-office procedures that are causing you problems?
Examine your financial situation
Consider your financial, operational, and insurance positions if you’re self-funding placements.
- What is the current value of the cash on hand?
- During this time, how much stress is the administration putting on your business?
- What happens if your customer is unable to pay? Are you safe and protected?
- Check the status of your payments. Are they past their due date? Is your customer delaying payment?
- Examine all of your permanent placements
- What are the highest-value invoices that haven’t been paid yet?
- Are you able to agree on new payment terms?
- What is the value of the invoice you have yet to send?
Maximising cash flow
All recruiting companies should make turning invoices into cash a top goal.
In a cash flow constraint, both parties (buyer and seller) are likely to pursue tactics to postpone payments and recover cash faster, resulting in a standoff.
You may quickly eliminate these talks by partnering with a financier to fund your invoices. Time, energy, and relationships are all saved.
Funding invoices created from timesheets to a financier allows you to earn your gross margin from the invoice up-front if you place temporary employees, contractors, or interim workers.
Having rapid access to cash improves your capacity to trade and fulfil all of your fixed and variable expenses.
The financier is also responsible for credit control and payment management because they are assigned to the funding.
You can also save time on administrative tasks if the invoice financier has back-office features built into their product. Being efficient will allow your company to focus on relationship management, business development, and clear communication.
Simplicity provides 100% funding for temp and permanent recruitment businesses. So whether you have one or 100+ workers, Simplicity’s scalable funding pays your workers and you, your margin – every week – without fail.
Please feel free to contact us on 01594 888518 to find out more about our recruitment finance solution or download a copy of our brochure download our financing brochure.
