How sure are you that you can pay your bills?
By Nik Askaroff
The terrible weather conditions over the last month or so have done nothing to help the difficult cash flow that hits many companies at this time of year.
Unusually, the South East suffered as much, if not more, from the recent snow storms than many regions and the inability to deliver products or services for nearly two weeks will have seriously damaged companies’ cash flows. Yes, you may recover the business but experience shows that this can take three to six months, and in the meantime you have bills to pay.
So have you done a proper short-term, detailed cash flow to show that you can manage? Every Director has a duty to show that they have acted reasonably to ensure that they can pay their suppliers, and a detailed cash flow is the only way to do this.
Inland Revenue statements show that over 150,000 companies have come to payment arrangements with them regarding outstanding Tax and NIC. But beware. They are pushing for independent business reviews to be carried out on any company with major amounts outstanding and their agreement to arrangements will be based on these reviews and may be more difficult to secure in the future.
Research by Business Link showed that nearly a third of business owners do not have any effective strategy to manage cash flow let alone any action plan in event of falling short of cash. In these difficult times this is crazy. Whether or not you need it right now, you should still have a strategy in place should money run tight.
The evidence from previous recessions is that more companies run into cash problems post-recession than during it .This is due to costs, such as debtors and stocks, increasing as the business starts to grow again.
Hopefully we’re now seeing the beginning of the end of this latest crisis, but are you sure that you can finance any new business and the growth that you are targeting? Even more importantly, are you sure that you have the cash flow to pay your bills and to survive?
The good businessman shouts for help before he needs it and whether from Chambers of Commerce, Business Links, banks or independents such as EMC, there is plenty of help out there. There is a light at the end of the tunnel. Make sure that you don’t fall over before you get to it.
January 2010