Company Cash Flow Problems: What Are Your Options?

What are company cash flow problems?

Cash flow problems arise when a company has more money going out than it has coming in. While temporary cash flow problems are not uncommon over the life cycle of a business, if the situation is left to continue without remedial action being taken, the company's position can quickly deteriorate. 

Business cash flow problems open the door to a number of other issues which can lead to legal action and formal insolvency proceedings being commenced against the company.

A company is insolvent when it becomes unable to meet its financial liabilities as and when they fall due, and although this is not necessarily the same as having cash flow problems, there is usually a close connection between the two.

What causes business cash flow problems?

There could be a number of reasons why a business has a deficit in available funds and is experiencing squeezed cash flow. Usually the sources of cash flow problems can be categorised into three main areas:

• A surplus of outstanding/uncollected invoices
• Products/services not moving
• Poor business model/ineffective management

Struggling with your cash flow? If you have poor cash flow, you need to speak to a member of the expert team at Real Business Rescue to understand your next steps - Call Today on 0808 253 5217

 

 

 

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Company cash flow problems warning signs

A problem with a limited company's cash flow can occur from a number of different events, some of which are beyond the control of the company. Being unable to keep up with repayments on any of the following should be taken as a warning sign that your cash flow is compromised:

• Business overheads
• Suppliers
• Staff wages and pension contributions
• Landlord, lease, or mortgage
• Customs and excise fees
• Contingency fees such as dilapidations bills and health and safety fines
• Unfair dismissal fines

How to improve company cash flow

You’ll need to be honest with yourself and face up to figures in front of you - your cash flow issues may be just a temporary problem that can easily be resolved, but also consider whether you’ve been in denial and there are serious underlying issues which will take radical steps to rescue the business in order to save the company from closure.

Once a company begins experiencing cash flow problems the biggest worry for directors is being faced with a winding up petition by creditors which means your company may potentially be a matter of days away from compulsory liquidation.

There are several different ways in which cash flow may be improved, such as by increasing income, improving profit margins or by reducing the debt repayments to creditors through formal or informal negotiations.

If you're unable to increase income despite your best efforts and you can't afford to pay your bills and debts as and when they fall due, then the only remaining option for rescuing your business from insolvency is to approach your creditors and HMRC with some type of payment plan proposal to begin the route to recovery.

Once a company begins experiencing cash flow problems the biggest worry for directors is being faced with a winding up petition. It may be just a temporary problem that can easily be resolved, but the underlying issues could be serious which will require more formal restructuring help. Business cash flow problems open the door for a great number of other issues which can lead to formal insolvency proceedings unless you seek help from professional insolvency specialists at the very first warning signs.

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Pauline Whitehead

 

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Tom Procter Business Debt Expert

How Might a Business Deal with a Cash Flow Problem?

If you believe your company's cash flow problems may be leaving it at risk of becoming insolvent, you should make it a priority to talk to an insolvency practitioner as a matter of urgency to understand what options you have for dealing with your creditors.

Whether we need to help restructure your business, help you obtain financing or set up a Company Voluntary Arrangement with creditors, there is an answer to your cash flow worries.

When advising how to avoid cash flow problems and the consequences of having no working capital, we may suggest entering into an invoice finance arrangement if you have a surplus of uncollected debts from your customers. On the other hand, your company may need to undergo a process of restructuring in order to streamline operations and improve efficiencies across the business. This can be done via administration

How Real Business Rescue can help with cash flow problems

Our ultimate goal here at Real Business Rescue is to find a means to help your company survive financial distress and period of cash flow problems. With 100+ offices across the UK, you’re never far away from expert and confidential advice. Call our team for immediate help and advice.