Almost half of small companies in the UK have been hit by a cash crisis – for 50% of the small businesses polled by Everline in 2013, money was not readily available to pay for essential financial obligations and expansion was put on the back burner. Regular access to cash flow is crucial. For example, small recruitment agencies set up to handle a specific need in the area are finding it hard to progress beyond making ends meet. If you run a small business, what solutions do you have to avoid cash flow problems and move forward? 
Cash Flow Problems
In the survey, 29% of respondents said that a lack of cash flow was restricting their business expansion. An additional 23% of businesses had put marketing initiatives on hold, and 28% said they paid suppliers and other businesses late because of a lack of access to cash. These cash shortages occurred at least once a month, and the main problems happened when clients or customers paid late.
Bank Loan Solutions?
It is all too easy to fall into the cash flow trap. You run your business efficiently, but if you have no access to cash when you need it, you quickly run into problems. It only takes a few suppliers to pay late or several customers to forget to pay, and you end up stalled, with no money to go forward. Sometimes the only solution seems to be a business loan, but it is increasingly difficult to access loans in the current financial climate, and debt in the form of bank loans can be difficult to sustain. Fortunately, there are other solutions to free up your cash flow and maintain a healthily functioning business.
Look in a Different Direction
For example, outsourcing functions such as payroll can help streamline your business and make it easier to access cash when you need it. Outsourced payroll services are designed to take the payroll off your hands, so it is guaranteed to be paid. You can then use the cash to generate new business. This access to ready cash flow is vital for recruitment businesses and other companies that need to deliver payments regularly on time. In fact, when you think about how to set up a recruitment agency, one of the first things you need to consider is how you will make payroll.
Additional benefits of outsourcing payroll include no need for a payroll team and, therefore, a reduction in wage overheads. You also do away with other hidden costs such as postage, stationery, and printing. Once you have outsourced financial functions such as payroll, you can develop marketing and sales strategies and concentrate on how to grow the business rather than how you are going to find the cash to meet your regular payment commitments.
Outsourcing can have many benefits apart from not needing to house your payroll team in your office. You only have to pay for the service provided and not for additional expenses like sickness and holidays for team members. You can operate from a smaller office with less overhead for heating and light. You don’t have to provide office equipment and furniture. Perhaps the biggest benefit is that you gain from having a professional, knowledgeable team that specifically understand payroll. It is far better to have a specialist team that is up-to-date with the latest legislation than to have a ‘Jack-of-all-trades’ in your office who has to juggle many jobs at once. Outsourcing shouldn’t be viewed as a cheap option, rather a far better resource than you could otherwise provide.
Of course, this kind of service must be used responsibly, and it is important to know how you are going to ultimately pay your bills as well as the cost of the outsourcing. Outsourcing is no match for sound financial planning – when you prepare for the future, you increase the chances that you can cope with unexpected costs and obligations.
Source: http://www.telegraph.co.uk/finance/yourbusiness/10504363/SMEs-in-the-grip-of-cash-flow-crisis.html
Image attributed to FreeDigitalPhotos.net David Castillo Dominici
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