Does your business have a problem with fluctuating revenue? Here are some of our best tips on how to overcome cash flow issues.
Business owners may encounter liquidity issues for a variety of reasons, such as disruptions in the supply chain, labor market constraints, and growing inflation. We’ve put together some tips for managing cash flow and preventing possible impacts on your debt obligations to help you grasp and handle these challenges.
1. Do a cash flow forecast
It might be challenging for businesses to modify their cash flow management when they haven’t experienced a liquidity crisis. You might be able to expand capacity for other financial obligations and foster trust with shareholders and lenders by switching to a receipts and payments basis, doing daily forecasting, and integrating short- and medium-term forecasts.
2. Conduct a stress test and map out “what if” scenarios
By stress testing your forecasts for various impact scenarios, you can assess whether your liquidity is sufficient. Then, you can make decisions based on real-time data. This can also help you decide how to respond to your financial stakeholders when they ask for information about your business’s future prospects.
3. Communicate with your financial partners
Despite your best efforts, your business may still be having cash flow problems. Communicate proactively with your financial institution to go over your choices if forecasting and stress testing indicates that your business may be unable to pay its debt obligations. Waiting until your liquidity is in a crisis is not advisable. If there’s a chance you won’t be able to make a particular payment, let your financial institution know as soon as possible. They might provide some flexibility.
4. Review temporary finance options
Other sources of short-term financing may be available, and these are always changing. Consult a business advisor to learn the best course of action for your situation.
5. Speak with customers and suppliers
Regularly communicate with your clients and vendors to identify any potential inconsistencies in your cash flow. For instance, sending invoices on time will help you speed up cash collections. Consistent, proactive communication may also uncover opportunities to negotiate discounts or establish flexible payment options.
6. Get your GST/HST returns in
If your costs exceed your income, timely GST/HST returns can help you have access to cash sooner. This is typical for businesses with start-up expenses, but it is possible for older businesses as well due to the timing of expenses or unforeseen circumstances. Even if you can’t convert the money into cash, you should still remit GST/HST and other payments on time to avoid penalties and protect the financial stability of your business.
7. Consider R&D tax credit eligibility
By filing your corporate income tax return early, you can expedite prompt access to any refundable tax credits your business may have, such as those provided under the Scientific Research and Experimental Development (SRED) program.
It’s challenging to conduct business in these turbulent times, but we’ll work with you to discover the best answer for your business. Our experts can help you figure out the best course of action if you want to boost your cash flow.
