Despite recovery, finance management as crucial as ever |
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| Finance | |
| Written by Gary Howes | |
| Friday, 05 March 2010 | |
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Access to adequate funding can still prove challenging. How businesses manage their finances during the coming months is crucial explains Evette Orams, Managing Director of Hilton-Baird Financial Solutions, “Having lived through one of the most difficult trading conditions in recent memory, it is encouraging news to hear that the market appears to be picking up. However, life for the majority of SMEs is still extremely challenging and how they approach these next few critical months can make the difference between surviving and coming out of the recession stronger to make the most of the opportunities the eventual upswing will bring. During this initial period of recovery, access to adequate funding can still prove challenging, whilst the knock on effects have meant that late payment and bad debt are potentially more of an issue for SMEs now than in the depths of the recession. Therefore, we would encourage all businesses to develop a post recession plan to help them to navigate their way around potential pitfalls and position their business for success to come.” She concluded. Hilton-Baird has the following tips for businesses on managing cash flow in today’s post recession market. Go back to basics – where do you want your business to be After surviving the recession, now is the time to reassess your business goals. The downturn might have put paid to some of your plans but the shake up can create new opportunities too. Make sure you keep abreast of the changed landscape and your capabilities so you tailor your business plans accordingly. Don’t run before you can walk The pressure is on to secure new business and kick start growth. This has led some businesses to consider diversifying in an attempt to tap into alternative markets. By all means think big but approach ambitious plans to change focus with caution. Maintaining strong customer relationships and providing excellent service should come first. Weigh up the costs v benefits of expenditure Continue to keep a close eye on your costs. It is worth taking a critical look at your planned expenditure - maybe contract hire or leasing could be more cost effective? Thinking ‘outside the box’ could provide access to the required resource, whilst reducing money out the door. Keep on top of collections Focus on converting work in progress into cash, by keeping on top of payments and billing early. You should credit check all customers before embarking upon large projects and be mindful of trading with companies which appear to be poor payers. Protect your business against late payment and bad debt Recession leads to an increased chance of falling victim to late payment and bad debt and it can take a long time for the situation to improve. Make sure you have adequate cover in place - credit insurance, employed either as a stand alone facility or bolted onto an invoice finance facility, can safeguard your business and ultimately assist your own credit rating. Communication is key In this current climate, it’s particularly critical for businesses to stay in regular contact with all stakeholders, especially customers, suppliers, bankers, accountants and legal advisers. This makes sure you’re front of mind for debtor payments, in addition to being more likely to retain the goodwill of funders and clients. Maximise funding There’s never been a better time to benchmark your funding needs. Invoice finance, in particular, is proving to be a flexible funding tool for many businesses as they navigate their way through these tough times as it provides access to increasing funding without adding to debt as the cash available grows in line with sales. Comments (0)
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