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Is Your Business Struggling With Cash Flow?

Cash flow issues make or break your business. Read on to find out what you can do to protect yourself and your business.

Generally, if a business is profitable, it is deemed to be a success. However, this one-dimensional view can cover many internal financial issues. Healthy cash flow is key to a business’s long-term survival. Without good cash flow, an unexpected expense or a client not paying on time can be a fatal blow.

If there is not enough income to cover day-to-day expenses such as rent and wages, your company is at risk. High-interest cash flow loans or risky financing agreements are not the way to go. Fortunately, there are solutions that allow you to avoid insolvency.

Why Are You Struggling With Cash Flow?

Every year 50,000 UK businesses close due to poor cash flow, it is deemed a prevalent issue, especially for new businesses. Ever since the pandemic, businesses have stretched cash flow to breaking point in a bid to financially recover. On top of this, there are certain sectors such as construction and logistics that are inherently at risk due to their established payment structure.

 Some of the most common causes of cash flow problems are:

  • Low number of sales.
  • Ineffective financial management.
  • High interest loans.
  • High overheads.
  • Late/Non-payment from customers.

Cash flow is usually a result of either a lack of financial planning, an economic downturn or a combination of both. As with many issues, the sooner the problem is dealt with, the quicker a positive outcome can be reached. Cash flow is a priority issue, as one unexpected expense could be enough to close your business. Unfortunately, cash flow issues are unavoidable sometimes but, the good news is that there are options available.

Is There Anything You Can Do?

For many business owners, quick finance is the first solution they can think of to resolve their cash flow issues. This is the last thing you should do. By taking quick, high interest loans you are just extending the decline of your business and, increasing your personal exposure as a result.

So do not sign a personal guarantee, do not take out an invoice financing/factoring agreement and do not enter into formal insolvency such as administration/CVA. There are always fewer formal alternatives available, this is why we recommend consulting with business specialists before making any final decisions.

Liam Cooper

Senior Consultant

Did you know…

Administration is by far the most expensive type of formal insolvency in the long term. This is largely due to the expensive fees charged for the management of the administration process.

As well as this, under 10% of administrations see the business successfully recover. So, although it may seem like an attractive option, it is not always the most commercial choice.

There are a series of changes you can make immediately to improve your business’ cash flow and overall health, these include:

  • Raising prices.
  • Cutting costs.
  • Working with suppliers.
  • Implement a good invoice system.

These changes may help to free up working capital and allow you to trade out of your current situation. However, if the underlying problems of your business derive from high levels of debt, unpaid invoices or HMRC arrears, these changes will not alter your situation.

Often high monthly payments are enough to put a business in the red. For example, we recently helped a client who was paying £8,500 per month for a CBILS loan taken to keep his business running. But with a significantly reduced monthly payment, he was able to keep the company trading.

If your business is dealing with unmanageable debt, you will need to take drastic action to prevent formal insolvency. This requires the help of dedicated business insolvency experts to negotiate and manage your creditors and ensure there is no personal consequences for directors.

How to Solve Cash Flow Issues

If your cash flow issues are an immediate threat to your business’ survival, then you need to act immediately. This is a likely indicator that your business is insolvent. This carries serious consequences for the company and its directors. Trading irresponsibly at this point can lead to legal and financial penalties for directors. Most importantly, you may be made liable for company debts.

A viable option you must consider at this stage is consulting experienced business debt experts to devise a strategy and an action plan as to how a positive outcome can be achieved.

Our strategies here at Bell & Company allow you to fully understand your best options on how to deal with cash flow issues properly. Every situation is unique and so is every solution. Ultimately, the key aspect is protecting the best interest of your business and limiting your exposure from personal guarantees, directors’ loan accounts and investigations into your conduct.

Bell & Company offer a free case review, contact us today to speak to a specialist.

Contact us today to speak to a business debt specialist.

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