Business cash-flow problems
Profit and cash are different
A company can show accounting profit while being unable to pay its bills. Customers may pay late, stock may tie up funds and loan repayments may fall due before receipts arrive. The useful starting point is a dated cash forecast.
List the actual funds available and the next essential payments. Separate dependable receipts from disputed invoices, prospective sales and conditional investment.
Identify the cause before choosing finance
- Late collection: check payment disputes, terms and customer concentration.
- Low margins: compare selling prices with the current cost of delivery.
- Overheads: identify fixed commitments and the cost of changing them.
- Growth: calculate the cash needed to complete work before payment.
- Debt repayments: include all facilities and arrears arrangements together.
Test a practical recovery plan
Show what changes, when the benefit arrives and how the transition is funded. Include tax and wages, not just the suppliers pressing hardest. Review a less favourable outcome so a minor delay does not immediately break the plan.
If the company cannot meet debts as they fall due, obtain advice on duties to creditors before further borrowing, transfers or commitments. Funding does not by itself cure an unviable business.
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Common questions
Collections may help, but review the entire cash position. A disputed or doubtful debt should not be treated as certain money for an immediate payment.
Yes, if fulfilling orders consumes money long before payment or the work is loss-making.
When the company cannot meet obligations, arrears are growing or continued trading may worsen creditors’ position. You do not need to wait for court action.
Further reading: official GOV.UK guidance. General information; procedures and advice depend on your circumstances and jurisdiction.