Tag Archives: Cashflow

Help with accessing support for small businesses

In the news recently there have been horror stories about how difficult it’s proving for small businesses to access the government’s CBILS business support scheme. Here we look at how to get the best result in any funding application, and particularly the Covid-19 support.

We are currently supporting a number of businesses with their loan applications so here are our tips on what to include in your application:

1. What support do you need?

The CBILS scheme is actually just government backing for standard bank overdrafts and loan so think carefully about ways to reduce your business spending in order to reduce the potential loan you will need. There is a raft of new measures to consider: furloughing staff, deferring VAT and requesting payment holidays, amongst others.

2. Make your case

The days of bank managers who keep in regular contact with your business are long gone so be prepared to give the bank an introduction to your business; include your last set of accounts, your most recent management accounts and a summary of your recent successes and future plans. Think of this as a sales pitch; make the bank manager want to back you.

3. Outline the effects of the disruption on your business

The bank will want to see the effect on both your profitability and your cashflow, over the next 3-6 months. A cashflow forecast is essential for this – now, more than ever, cash is king. As well as the numbers make sure you explain what changes you expect in words. Every business will feel the effects differently so you can’t expect the bank manager to know this already.

4. What will your business look like after this is over?

Do you expect some of your customers to disappear? Can you capitalise on the changes you’ve been forced to make? Are new markets suddenly open to you? Most importantly you need to extend that cashflow forecast to (ideally) show the bank that you expect your recovery to allow you to repay the loan that you’re applying for.

Finally, remember to state clearly how much money you want to borrow based on the forecasts above.


We have a detailed advice sheet on giving that application your best shot: Government support.
You can find other information and help concerning the government’s support for businesses at this time on our Covid-19 support page

Lucky Escape?

Just before Christmas a consulting firm that I had previously delivered some training for went bust. This was totally unexpected: the firm seemed to be doing well and had lots of new projects planned for 2020, but it was part of a bigger group and it appears that all was not well elsewhere in the group.

Obviously this was a tragic development for the staff who lost their jobs a couple of weeks before Christmas. In conversation with my contact just after the news she told me that she was impressed that I had insisted on invoice being paid promptly and therefore escaped being caught up in the insolvency.

I didn’t think too much of it at the time – the training was delivered in October and we had agreed that payment would be made during November – but her comments got me thinking.

Managing credit is always a challenge. In reality terms are often dictated by the customer and if you want to retain the contract you have to comply.

Once the product or service has been delivered it is difficult to apply pressure if payment is not forthcoming, even if you have included wording in your contract which states that goods have to be paid for before ownership transfers. Many businesses that I have encountered don’t even create a contract before they start supplying.

I am not bragging here about having escaped a bad debt; I firmly believe that this is more about luck, but in reality the only way to reduce your risk of not being paid is to be prepared.

Start out as you mean to proceed
Have a contract or at least terms of sale which outlines all of the responsibilities of both parties: it doesn’t need to be seriously legal: you could use an industry standard template but depending on what’s at stake it may make sense to speak to a solicitor.

This will cover the basics of what you’ll deliver and when, how much you’ll be paid and when, but also you might like to think about the worst cases of what could go wrong and what you’d be liable for if that happened. Are you planning to charge interest if you are not paid on time? What should happen if either party wants out of the contract – notice periods? reasonable compensation?

By setting out these points in advance (and highlighting them to the customer) you set the right expectations for your trading relationship, and you protect yourself against future issues, however unlikely they seem now. Crucially in the case above, my terms actually required payment at the end of October – so I was able to enquire about payment promptly and refer to the contract that the customer had committed to.

Unfortunately, having a contract alone doesn’t ensure that customers will pay on time. So what can you do to give yourself the best chance of being paid?

Make a conscious decision to give credit
Do you want to give your customer time to pay you? Wouldn’t the money be better in your bank? It may be common practice to offer credit, but that doesn’t mean that you need to offer every customer unlimited credit, for an unlimited period.

It is worth doing some research to ensure that the customer is who they say they are (identity theft is not just confined to individuals) and that they have a trading record that supports your faith in giving them goods without payment. At this point (when they want to buy from you, but haven’t got the goods yet) you have more power to ask them for accounts and supplier references “just for admin purposes”, so create a credit application process and follow it!

Follow up references and look for credit checks. This is not fool proof, it’s all historical information, but it can provide useful background and potential negotiating information.

Setting credit limits can be a useful tool in ongoing trading relationships – if you enforce them. Regardless of what payment terms have been agreed if you have decided that £5,000 is the maximum limit of credit that the customer can have, then you should not allow them to have more than that.

More importantly than anything else never give more credit than your comfortable with to a potential customer purely because they represent a “high profile” or “prestigious” opportunity. They may present marketing capital but what you need is money in the bank!

Keep good records
To keep on top of customer credit you need to have up to date information – how much has been sold, when payment is expected and the current outstanding debt. If you can’t trust the figures you have you will never be able to chase up payments with confidence and you may well miss warning signs.

As well as giving you information to use to control the risk of not being paid on time, up to date records also allow you to automatically send statements and payment reminders promptly – a simple and easy way of ensuring customers know how much is outstanding on their account.

Establish a relationship
In my experience the best way to ensure invoices are paid on time is to build good relationships with whoever pays the bill at the customer end. Whether this is the customer themselves or a member of their team, being friendly and helpful pays off.

For example, if you’ve given a new customer 30 days to pay why not call up a little while after the first invoice has been sent to introduce yourself?

Check up that you have the correct address details and that they have your bank details. You could try to find out more about how their system works: when should you expect to receive payment? How often do they make payments? (one of my clients pays everything on the 10th – chasing ahead of that is a waste of time)

This will help you feel more confident and if there is an issue it will be easier to find out about it and correct it.

Sometimes things will go wrong and there are not always warning signs, but if you have set up an easy to follow system that keeps you updated you can reduce the chances of being left with a bad debt and my favourite tool for improving cashflow. If you would like to enhance or review how you handle customer credit then drop me a line.