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Tips for Getting in Front of Cash Flow Challenges

by Laura Churchill, Senior Manager, Advisory, Grant Thornton LLP

 

Cash flow is a crucial aspect of any business, which is why it’s so important for owners and managers to keep tabs on how much is coming into and leaving the organization. Cash flow problems can come from many sources, including rising expenses, increasing interest rates, labour market constraints, and growing overhead costs. In today’s economy, managing your business’s cash flow can be the difference between success and failure.


To help you understand and address these pressures, we’ve compiled tips on how to manage your cash flow.


Do a cash flow forecast.


Businesses that haven’t faced downturns can find it difficult to change their cash flow management style. By regularly reviewing receipts and payments , conducting daily forecasting, and integrating short- and medium-term forecasts, you can increase capacity for other financial obligations and build confidence with shareholders and lenders. 


Analyze your cash flow projections. 


You can determine whether your cash flow is sufficient by stress-testing your forecasts for different impact scenarios, allowing you to make decisions based on real-time data. This can also help inform an appropriate response to your financial stakeholders and lenders, who may be looking for evidence that you are actively managing the cash flow of your business.


Communicate with your financial partners. 


Cash flow issues can arise despite your best efforts. If forecasting and stress testing show that your business might not be able to meet its debt obligations, proactively communicate with your financial institution to discuss your options. Don’t wait until your cash flow reaches crisis levels. Providing your financial institution with as much notice as possible will give them the knowledge they need to offer flexibility or help restructure your obligations. 


Review temporary finance options. 


Other sources of temporary financing might be possible—and these are changing every day. Speak to a business advisor and get advice on the best options for your situation. 


Speak with customers and suppliers. 


Communicate with your customers and suppliers on a regular basis to get in front of potential cash flow inconsistencies. For example, you can accelerate cash collections by submitting invoices in a timely manner. Consistent, proactive dialogue may also reveal ways to negotiate discounts or introduce flexible payment options. 


Get your GST/HST returns in. 


Filing timely GST/HST returns can help you access cash sooner if your costs outweigh your revenue. This is common for companies with start-up costs but can also be the case for mature companies because of timing of expenses or unforeseen events. File GST/HST and other remittances on time—even if you can’t turn the payment into cash—as it can help prevent penalties and maintain your business’s financial health. 


Consider government grants and programs.


The federal and provincial governments offer a range of programs to support businesses with project-based incentives.  From federal grants to tax credits, consider applying for non-repayable funding or lower interest lending to drive your business’s growth, innovation, and market expansion.


Doing business in uncertain times isn’t easy, but we’ll work with you to find the right solution for your business. If you’re looking to improve your cash flow, our advisors can help you find the way forward. 


I help clients gain insight into their business to grow, sell, or transition. Using critical thinking and taking the time to learn about each unique situation, I collaborate with clients to help them understand the value of their business, including intangible assets, meeting their financial reporting requirements, and other valuation needs.  Hailing from Corner Brook, I am one a handful of advisors in Newfoundland and Labrador  who holds the designation of Chartered Business Valuator.


As a member of the Grant Thornton team, I work with small- and medium- sized businesses on a variety of engagements, including financial forecasting and debt advisory, business plans, operational reviews, and valuations for the purposes of income tax planning, financial reporting, shareholder disputes, share transactions, and litigation.


Contact Laura Churchill at Laura.Churchill@ca.gt.com or +1 709 778 8833.

 

 


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