As Ireland emerges from lockdown and businesses reopen, SMEs are trying to ease the strain on working capital caused by months of reduced trading. With several new social distancing guidelines in place, businesses are finding new ways to operate in this evolving environment.
Alongside economic recovery, companies are focused on cash flow management to ensure survival. Here, we look at three ways to ease pressure for businesses reopening:
Reconsider payment terms
Late payments are a problem for SMEs at the best of times, often causing cash flow uncertainty and impacting their ability to operate normally. Now, findings from the latest Close Brothers Business Barometer found that late payments are a problem for two thirds of Irish SMEs, with 71% of these saying this makes cash flow difficult to manage.
Discussing payment terms with your customers could help to plan around current challenges, with shorter credit periods increasing the working capital available to your business.
If you still find you have liquidity tied up in your unpaid customer invoices, invoice discounting can resolve cash flow issues. It instantly releases the value of these invoices, providing upfront payment and confidence because income dates are reliable.
Regularly monitoring and forecasting levels of stock can reduce wastage and therefore save costs. Analysing your firm’s sales history and staying up to date with market trends could help to avoid having surplus stock which would not be benefitting the cash flow cycle.
Asset based lending can be an effective way to release cash from your inventory, enabling your business to raise higher levels of funding than invoice finance alone. This method of commercial funding allows a business to secure borrowing against assets on their existing balance sheet such as stock, property or specialist equipment.
Release cash from assets
If COVID-19 has impacted your businesses cash flow, refinancing can also be a quick way to release funds from assets on your existing balance sheet, such as commercial vehicles, machinery or property.
This type of asset finance enables a firm to gain access to additional working capital, which can be used elsewhere in the business, for example purchasing new equipment or easing cash flow. We will purchase the asset from you at an agreed price and rent it back to you for an agreed fee over a specific time period. This means the business will still have full use of the asset and can spread the cost over an agreed period of time, allowing you to budget more effectively.