Cash is King

It is important that businesses realises cash is king and take every step to protect their cash flow.

Financiers remain cautious about lending; particularly where there has been poor cash flow planning and businesses have not foreseen cash shortfalls.

Where forecasts are prepared, it is usually necessary to demonstrate the following:

  •  Profitability on lower levels of turnover.
  •  Realistic forecasts of turnover, taking into account sensitivities on the downside.
  •  Control over labour costs and some evidence that they are flexible.
  •  Plans to take into account both corporation tax and higher rate income tax liabilities in the future.
  •  Realistic assumptions regarding working capital and the amount tied up in debtors and available from creditors.
  •  An accurate cash flow projection will alert you to potential trouble and give you plenty of opportunity to implement protective measures.
  •  To improve cash flow management, you should consider the following:


  • Is there too much stock tying up funds?
  • Are storage costs excessive?
  • Is obsolete stock being held?
  • Consider discounting slow moving inventory to generate cash
  • Eliminate unprofitable items altogether.

Work in progress

  • Work in progress is generally more expensive to finance than stock since it includes both material and labour.
  • Agree stage payment plans for large projects.Invoice for additional costs as soon they arise to deal with disputes as early as possible.


  • Credit checks should be carried out before taking on any new customers.
  • Agree your business terms in writing before opening an account.
  • Consider early settlement discounts and interest charges for late payment.
  • Set up a credit control policy with clearly defined credit limits for customers.
  • Review debtor lists on a regular basis and ensure a policy is set up for chasing and dealing with late payers.


  • Understand their terms of business to ensure that they fit in with yours.
  • In the case of one off contracts ensure that you review the terms and conditions and renegotiate if necessary.
  • Agree extended payment terms in advance if necessary.

Direct debtors and standing orders

  • Obtain lists from your bank to ensure that there is no unnecessary expenditure being incurred.


  • If there is a need to reduce these costs, consider alternatives to redundancy (which is a one off cost with no benefits) such as short-time working, pay freezes or cuts and the removal of overtime.

In today’s world it is important to keep everyone informed and to make them aware of the importance of cash management cost-control strategies.  Encourage suggestions for improving.

Expenses paid in advance

Many costs can be spread to improve cash flow.  Look at all your payments in advance and see if there is an option that you can use to suit your business.  There may be an interest charge, but this could still be less than you pay for your bank facilities.


It is important to differentiate between those which are mandatory and discretionary.  Consider reviewing all discretionary payments to ensure they support the strategy of future development of the business.


Notwithstanding the tax breaks for purchases of new equipment, you should have a fixed asset register and this should be reviewed and any items that are no longer required should be sold.  Your insurance policy should also be reviewed to ensure that you are not over/under insuring as in either case there could be future costs to your business.

Bear in mind that any forecasts need to include a replacement programme where necessary.

Funds, grants and other help

Review your bank facility letters and see when overdraft and loan facilities will be reviewed.

Allow sufficient time for negotiation with current or potential banks.

It may be worth considering other financial sources, such as invoice discounting, payroll funding and alternative investments.

If your bank is unable to help you (which may be the case in these troubled times) and you require assistance, where would this help come from?

Make sure that you have up to date financial figures, both year end and management accounts if you are seeking to borrow money from the bank as well as an idea through forecasts of the amount needed to be borrowed and the timescale of the borrowing.

It is important to you that your bank understands your business requirements.  You need to ensure that your business’s financing arrangements are properly structured.

Be aware of any covenants that are in place and they are not breached, as this act may cost you excessive charges. Bear in mind that overdrafts can be repaid without notice, but with loans it is unusual that these are repaid on demand unless covenants are breached.

Tax and VAT

If you need to delay paying your taxes, negotiate with HMRC sooner rather than later.  Many businesses have taken advantage of HMRC’s Business Payment Support Service Scheme to gain more time to pay.

Make sure that the VAT Scheme you are using is the most appropriate one for your business.

Key performance indicators

  • Cash in the bank
  • Debtor days
  • Stock turnover
  • Sales leads generated
  • Orders fulfilled
  • Gross margins


  • Stock lines

We can examine for you the profitability on each line of stock or indeed customer to see whether these are profitable having regard to margins and cash that is tied up with these assets.

  • Early settlement discounts

We can calculate for you whether it is worthwhile offering early settlement discounts taking into account your own borrowing costs.

  • Other financial sources

We can discuss with you the advantages and disadvantages of asset-based lending and other forms of funding.

VAT Scheme

We can review whether your current VAT Scheme is the most appropriate for you.

Key performance indicators

We can identify with you the key performance indicators for cash management and set up reporting mechanisms for you

Cash flow forecasts

We can prepare simple and detailed cash flow forecasts taking into account sensitivities on sales, margins, overheads and capital expenditure.  We can discuss these figures with you and examine them in the light of covenants and terms with you and be around when you are using them to negotiate lending facilities with your bank.

We would be pleased to help you in any of the above areas if you feel it appropriate.

How can I help?

If you believe that there may be something that I can do for you to improve your cash flow,  then please contact me, Andrew Watkin, at Assynt Corporate Finance Limited on 07860 898452 or by email

The information contained in this briefing is based on information available as at the date posted and may be subject to amendment.  It is written as a general guide and is not a substitute for professional advice.  You are strongly recommended to obtain specific professional advice from us before you take any action.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this briefing can be accepted by Assynt Corporate Finance Limited or its employees.














  • The Business & Technology Centre, Bessemer Drive,
    Stevenage, Hertfordshire
    SG1 2DX United Kingdom
    07860 898452
    Company Number 08414792 Incorporated in England & Wales

    Succession planning and selling businesses in Hertfordshire, Buckinghamshire, Cambridgeshire, Bedfordshire and Middlesex.