Partner Article

Managing cash flow key to survival for SMEs

Peter Worrall, debt recovery manager at Hampshire law firm Moore Blatch looks at managing cash flow in SMEs.

The current economic climate means that credit control, and the chasing of unpaid debts, represents an ever greater issue for businesses and in particular SMEs.

It is vital that businesses review their cash flow and credit control procedures to ensure that they are in the strongest possible position.

You only need to read the news to see how hard firms are being hit. Recently discount fashion chain Peacocks became the latest high profile firm to go into administration. But it’s not just the big boys who need to watch out.

Many businesses need to adopt new practices and a new focus in respect to credit control, to ensure that they do not become a victim of the economic climate.

The demise of chain’s such as Peacocks should come as a ‘wake up call’ for many firms.

We work with a lot of businesses where we see the same mistakes being made and the signs of trouble being overlooked. Taking appropriate steps early on can help, as when the decision to pursue the debt is taken later there are often few assets left to recover.

Top tips for protecting cash flow:

• Due diligence - When starting work with a new client undertake appropriate due diligence as to their financial means, assets and credit risk. This is one practice which can really pay in the long run.

• Spot the signs - Failure to satisfy an outstanding debt may be the first sign a company is struggling. This should be acted upon immediately and strong attempts made to recover any monies due. You should also consider putting a freeze on any further work or further credit for companies who fail to meet their invoices.

• Bad debt – Closely supervising your own credit control procedures can help reduce the risk of needing to write off ‘bad debts’, which in turn could leave you facing difficulties of your own.

This was posted in Bdaily's Members' News section by Lisa saxby .