Hopefully, we’re emerging from one of the most challenging and testing periods in a generation. For many businesses it has been a time of struggle and survival, but as we find our feet again and readjust to once familiar albeit now slightly flexed ways of working, it is time for businesses to refocus on growth and expansion.

A growing and expanding business needs fresh injections of funding and capital to provide the much-needed working capital to facilitate that growth.

For decades now, UK businesses have benefitted from a range of funding and capital. From grants to government tax credits, to business loans, asset finance, angel investment and venture capital, the UK has one of the most robust and active funding networks on the planet. In particular, our active business angel and private equity sources of funding for early stage, high-growth digital and technology sectors are at the very top of the global charts in terms of activity. Ally this firepower with active and innovative government co-investment pots, not to mention a wide range of support networks and advisory bodies, we have a funding ecosystem that is the envy of other nations. And no matter your political persuasion, the pandemic has undoubtedly seen businesses benefit from a wide range of government support and survival schemes.

This plethora of external funding is a huge boon for UK businesses, but, paradoxically, it means that we often forget the very best source of finance for any business. Many years ago, I heard the then European business angel of the year talk about this very subject and proclaim that ‘the easiest business to fund is one that actually doesn’t need funding’. By this he explained that the greatest source of finance for any business, is the cash generated by the business itself. And, further, the single most important thing that any business can focus on is ensuring that the business is cash generative.

These words have an even greater resonance now. As we emerge, lift our eyes and set our sights upwards and outwards on business growth, we need, more than ever before, to be focussing internally on the greatest source of funding of them all – the cash generated by our business itself.

Regional managing partner, David Booth, discusses six critical ways to tap into the greatest source of funding of them all and to ensure that your business is cash generative.

Issue your sales invoices as promptly as you possibly can

This is the first step in making sure that the work you do generates cash. As soon as your work has been completed, or the service has been provided, issue a sales invoice as promptly as possible, and ideally electronically. Make sure all invoices follow a template. Accuracy is important as errors can lead to delays in settlement. Ensure your customer data is up to date, take time to check names, addresses, invoice numbers, customer references, purchase order numbers, narratives, VAT and invoice totals are all accurate. A little care at this stage can pay huge dividends in terms of collecting the cash quickly.

Have clearly set and well-communicated settlement terms

It’s important that your customers know what you are expecting from them in terms of settlement. Ideally, set out your terms and conditions in a letter of engagement for your customers to sign, and have the terms and conditions included on your invoices and other documents. Be clear about what is being provided, how much it will cost, the project timeline, when payment is due, and what happens if payment is late. Clearly setting out your expectations will limit disputes and delays and will help you collect the cash promptly.

Have a strong credit control function with well-documented procedures

Employ a strong credit controller who recognises the importance of using the latest technologies to improve the credit control process, who will chase every overdue payment, who will put poor payers on a stop list and who won’t be afraid to outsource tricky debts to a collection agency. Good credit control will help you to get paid quicker which means you can pay your own suppliers quicker, avoid late payment charges, increase your own credit rating, and provide you with the cash to invest in the business.

Develop strong relationships with your customers and suppliers

A good credit controller will forge strong relationships – a little rapport with those who pay goes a long way. Knowing the best people to contact is hugely important and a good credit controller won’t be afraid to push your invoice to the top of the list.

Make sure your business and underlying transactions are profitable

It perhaps sounds obvious, but the fundamental building block in cash generation is profit. If your underlying transactions are profitable, then with the right credit control, these transactions will generate cash and working capital. Unprofitable transactions will withdraw working capital from your business. Use the latest cloud-based accounting solutions to manage and report your transactions and financial performance in a way that helps you ensure your business is profitable. Seamlessly sync this data with the latest cloud-based cash flow tools to ensure that this profitable performance is generating cash.

Structure your tax affairs effectively

There are a number of tax incentives, structures and reliefs that you or your company could benefit from to ensure that you or your business are not paying more

tax than you should every year. Smart, strategic tax planning helps ensure you and your business are paying the right amount of tax. Tax can be a complicated area therefore speaking to a trusted business advisor is critical to ensuring you remain compliant whilst having a positive effect on the cash in your business.

Our team of trusted business advisors help SMEs to grow and expand by implementing strategies to generate more cash and harnessing the very latest cloud and accounting solutions to analyse the cashflow in a business. To discuss your business and cashflow or to discuss how to use technology to make your business cash generative, speak to your local trusted business advisor or contact david.booth@azets.co.uk