Cash flow problems for company directors

 

 

 

Video Script

Cash flow problems can materialise very quickly, and create a financial decline into insolvency that is difficult to reverse. Being aware of the cash position of your company is the first step to combating long-term problems, and allows you to act swiftly if you need to bolster cash reserves.

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This video looks at potential options and solutions for company directors when cash flow is a problem. Initially it is important to establish whether or not the business is insolvent, as if so, you need to stop trading and seek assistance from a licensed insolvency practitioner (IP).

There are various solutions to poor cash flow within a business, however, and this video covers a range of practical options that may be suitable. Cash flow forecasting provides a foundation for healthy cash flow – it helps you assess your cash needs for the coming months and highlights any gaps that need to be filled.

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Factoring and invoice discounting is one solution that may be suitable if you run a sales ledger of value. The lending firm releases a proportion of each customer invoice, and the remainder is paid to you (minus the lender’s fee) once your customer has paid in full. The benefit of invoice finance is that you receive regular payments that support your working capital day-to-day.

If cash flow is poor and insolvency seems to be looming, an official solution may be required. This could involve formally renegotiating your debt repayments via a Company Voluntary Arrangement, for example.

Obtaining professional advice is key to solving business cash flow problems, and can quickly lead to improved results.