Relieving cash flow pressure in debt, insolvency or liquidation crisis

If you are facing a debt or cash flow crisis or have been trying to get finance to pay debts or tax, if pressure from creditors is keeping you from running the business, you need to examine all your options now.

Every business has periods where you just can’t find the cash flow to pay all creditors and tax debt on time all the time.

There are several things you can do.

The obvious but tedious and moderately expensive thing to do is factor your debtors into cash. It takes a few weeks to get all the info together and should cost about 2.5% of gross. But remember that 2.5% may be 20% of your profit so use this option sparingly.

Use your creditors for cash flow.

With personal contact and a previous good history, your suppliers will listen unless they too are under pressure – if so, no harm done, you can sympathise and they will at least understand your problem. Your suppliers value your business. Sometimes bigger companies like to act tough but if you talk to them they often let you have some leeway and provide a faster source of cash.

Use your debtors for cash flow. Again if people have started to use you as their bank, get on the phone and explain that it is now a problem for your own cash flow. You would like to help them but your bank has started to insist and you must have cash now. Offer them the discount for paying cash with order that you might have given a factoring company for your debtors.

Refinance for more cash.

We have helped dozens of businesses find a better banker. You just never know when a new manager has started with a bank and want to get runs on the board (runs on the board in their case = loans). So many times you can end up with a better deal with a new institution looking for business. It helps to have someone like Triple R making the calls on your behalf and especially if we can recommend you (remember we are insolvency consultants so financiers respect our opinion – we’ve seen it all and if we are involved they know we will be helping your business survive, prosper and repay).

Sell off unnecessary assets for cash. People like a garage sale and business people are no different. But make it a good one so you get the best value possible. Our contacts with auctioneers and other resellers are invaluable here.

Get an ‘angel’ interested.

This is where you have to be careful – we are talking cash in return for equity, fixed and floating charges and possibly losing control. So make sure you are prepared before you go hunting for a savior. Ask us first. We know most of them.

Use suppliers to get equity and cash – sometimes your creditors have been secretly eyeing off your business as a way to diversify and sometimes they see opportunities you can’t. Discrete inquiries by a third party like Triple R can reap solutions.

Use customers to get equity and cash – same applies to your debtors. As above.

Cut costs. In a study of US SME’s in the USA it was found that the average business made 80% of their profit from only 20% of their business divisions or activities. That means that 20% of their business was ‘funding’ the other 80%. It bears examination and Triple R can help you reduce costs in a positive intelligent non-destructive way.

Increase your prices for more cash flow. How much does a 5% price increase your profits and how price sensitive is your volume demand? It’s a tradeoff of course and should be combined with clever marketing or PR but again it bears investigation.

Triple R has assisted in all sorts of industries, farming, engineering, Telcos, retailing building etc. for 20 years and can help your business become solid and profitable (and enjoyable) again.