Clients taking longer to pay

One of the trends I’m noticing right now is that companies are having problems with cashflow, particularly in the B2B space.

It’s either taking longer for them to get paid, or they’re not getting paid at all.

There are many reasons why this might be happening…

We seem to be entering a very unstable economic period with higher inflation, higher interest rates and higher taxes. This naturally has a knock-on effect on companies’ liquidity.

And many companies are still in flux following the pandemic.

One of our clients, for example, pivoted from serving established companies to serving new entrants to the market. These newer companies have a different funding model, which has led to payment delays.

Another client won an enormous contract with a well-known international corporation which looked safe as houses.

Their future looked rosy – until this corporation posted a profit warning, causing its shares to tumble and triggering a cascade of problems.

Through no fault of its own, our client went from a large win to being squeezed for funds.

And we’ve seen similar stories across the board.

Any sign of cashflow problems is extremely dangerous, because there’s only one thing that can kill your company…

…And that’s lack of cash!

You can bounce back from almost any other problem, but the day you run out of funds is the day your company shuts its doors.

That’s why you have to be so careful.

You might be reading this email thinking, “I’m really sorry for these other companies, but we’re in a healthy financial situation right now. We’re not seeing any liquidity problems ourselves.”

If so, don’t be complacent.

Given the state of the economy right now – and given how widely we’re seeing these problems – your customers might be struggling with liquidity, completely unknown to you.

And even if they’re healthy today, they might develop liquidity problems tomorrow.

Whenever that happens, it puts you in danger.

Your business doesn’t operate in a vacuum…

Your future partially depends on the fortunes of others – namely your clients!

So make sure you have excellent cashflow forecasts, so you can predict cash problems as far ahead as possible. The more warning you have, the more time you’ll have to make arrangements if there’s trouble on the horizon.

And spend time now thinking about what you might do if you did experience cashflow problems.

For example, what if your largest customer was two months late in paying you….?

What if your 2nd largest customer went out of business and couldn’t pay you at all…?

What if you suddenly couldn’t make payroll next month?

You can’t predict every difficult situation that might come up. But you can predict the worst-case and most likely scenarios. And simply by thinking about how you might react, you can give yourself a head-start if they do happen.

This kind of planning is all part of good financial management.

It’s not a luxury. It’s what well-run, grown-up companies do to mitigate risk and to future-proof themselves – particularly when the dangers are so obvious and urgent.

If your current accountant isn’t doing this for you, it’s time to upgrade your provision.

That’s where we can help.

Our Outsourced Finance Department is all about helping you make the best financial decisions for your future, so your company can maximise profitability and growth.

Part of that is making sure that you’re planning properly…

…Creating cashflow reports and interpreting them, and thinking now about what might go wrong in March, April, May or June – so we can nip any financial trouble in the bud.

If that’s the kind of world-class financial management you’re interested in, get in touch today.

Simply hit ‘reply’ to this email or call us on 01279 647 447, and let’s talk about how we might help you.

Warmly,

Garry

PS. The best time to deal with cashflow issues is right now…

…Before they hit you.

Watch out for my next blog, when I’ll share another way for you to pre-empt cashflow problems.

Why you hire the wrong accountants

The company owner took responsibility for building an accounting function which they understood very little about.

They had no idea what an efficient, successful finance department that helps propel a company forward looks like.

Read More »

Testimonials

Invest in your business today

Ready to step up, invest in your business and reap the benefits?

Get our blog posts directly to your inbox

"*" indicates required fields

Update Frequency
*
This field is for validation purposes and should be left unchanged.