Cash Flow

1st December 2011

Cash flow is one of the biggest issues in all businesses right now. Of course cash flow should be something we all keep a close eye on at all times, but when times are tough as they are at the moment, people hang onto their cash for as long as they can.

Traditionally this has always been an issue between big and much smaller businesses, whereby the bigger company tends to dictate how and when they will pay. A grossly unfair situation no doubt, but the smaller companies are so desperate to hold onto the big account that they let it happen, and can sometimes find payment being delayed for 3 or more months.

But now, it is not just the big companies holding back payment. It goes right through the whole economy, and naturally enough this is exacerbating what is already a very tricky situation. If the money isn’t flowing or circulating quick enough, the knock on effect down the line can be devastating. If every link in the line, delays for an extra 3 or 4 weeks, by the time the last person in the queue gets paid, it can be too late.

So what should we all be doing about it? Ideally we should all be paying on time, but that I would suggest is unrealistic for many or even most of us. But to cover our own backs we need to keep constantly watching and checking our accounts. As soon as a customer becomes late in paying we should be chasing them for their money. Always keep contingency plans, and keep an eye out for any warning signs that one of your customers is likely to go bust.

Above all, don’t ignore the warning signs. If it doesn’t feel right, do something about it as early as you can. If you don’t you could be the next one to suffer.

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