Five steps to manage your cash flow better

3) Don’t try your creditors’ patience

Creditors are generally happy to accept an offer to pay over an extended period but you must be very careful not to get this agreement and think you’re out of the woods. 

In my experience, you can renegotiate your debts once, but if you try to do it for a second or third time creditors’ patience runs out. They will quickly become wise to the fact that you either do not understand how to manage cash flow or you lack the discipline to do so. Please ensure that your forecasts are robust and that the proposed deal is viable.

4) Don’t let cash flow struggles wear you down

All too often I have seen directors lose their focus on a business due to creditor pressures resulting in frustration and depression. 

This can be a disaster for a business that really needs the owner to concentrate on how to turn it around, maintain staff morale and focus on the future. If that’s not possible then take advice on cash flow management strategies going forward and spread the burden.

5) If all your cash-flow strategies have failed…

I have seen scenarios where directors haven’t drawn a salary for one or even two years whilst they have been juggling with their creditors. Unless you are one of the Richard Bransons of this world, one of the main reasons to set up a company is to make a living and in an ideal world to sell the company and retire. 

Given all the pressures that business owners are under they deserve to be paid, but if the business in its current form cannot support this then the owner must seriously consider other possibilities. These might be employment elsewhere (without the pressures of dealing with creditors/staff/customers) or some form of restructuring of the business. 

Of course the best way to avoid this is to have a clear strategy on how to manage cash flow from the outset. Every business has its own challenges but if you do lie awake worrying about cash flow then please take advice and take it as early as possible. 

Develop some sound cash flow management strategies both for your health and for that of the business.

David Birne is a partner at the chartered accountants HW Fisher & Company.

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