Why Your Business Facing Financial Difficulties Frequently and How to Overcome Them

1. Why Your Business Facing Financial Difficulties Frequently and How to Overcome Them As you run your business, you are likely to encounter some setbacks that could hinder its growth and long- term success. This is a natural part of running a company of any size. Financial difficulties are just some of the problems you will encounter at some point as a business owner. And when they occur, it’s important to address them as soon as possible to prevent further issues down the line. Licensed insolvency practitioners can help you with that. They can also determine the causes of your organization’s financial difficulties so you can understand how they occur and learn how you can prevent and overcome them in the future. For many businesses, cash flow problems are the main causes of financial difficulties. Many companies don’t have enough cash on hand to pay their liabilities because of profit losses, overinvestment in capacity, overtrading, too much stock, seasonal demand, or unexpected changes in consumer behaviour or the overall economic climate. To resolve cash flow issues and prevent them from happening again, it’s important to plan where and when the cash will be coming from for the following quarter, so you can be confident that you have enough for upcoming payments. You may need to find an alternative lender to get the financing boost you need and to pay off critical payments and debts. Getting a short-term loan is a solution, but you could also consider confidential invoice discounting, which can let you leverage your sales ledger’s value. As you send an invoice to the customer, a proportion of its total amount will be available from your lender, and that can serve as working capital for an entire month. Invoice discounting is just like factoring, except that your customer may not know that you have obtained cash flow finance. You are still in control of the sales ledger, and you can continue collecting payments or sending reminders. Another important difference between factoring and invoice discounting is the former requires you to sell your invoices to the third party and the factoring company will take charge of collecting debts and controlling the sales ledger. Licensed insolvency practitioners could help you maximise your recoveries to the creditors in case your company is unable to survive. They aim to make sure that where possible your business survives and your assets are sold for the highest amount of money. Insolvency may be the last resort, but they will work closely with you to provide confidential invoice discounting to minimise and overcome financial difficulties. This article is written by Andrew Anthony, managing director at Savants. It’s an independent advisory firm specializing in corporate recovery and corporate insolvency. The company's licenced insolvency practitioners offer advice on insolvency procedures to companies, partnerships and sole traders.