27/05/2015

By Dan Roberts, Head of Trade & Working Capital, Barclays Corporate banking


As the economy continues to recover, businesses are facing increasing working capital requirements, which many, particularly small businesses, are not prepared for. Working capital can help to release much needed cash flow, which can help a business to grow, and in turn helps the economy to grow and the cycle therefore continues. For any business, planning ahead and completing a cashflow forecast should help you to think about potential contingencies you will need should you not receive a payment on time, and help to prevent a potential cashflow crisis.

In order to ensure a growing small business doesn’t run out of cash, it is vital there is a plan in place to help manage working capital and cash flow. There are many ways to do this, and a good start to managing working capital is by speaking to your bank or business manager who can help to discuss various options in order to find the most suited solution.

One way is Invoice Discounting, which can help businesses quickly release up to 85% of the value of approved invoices prior to the payment term. This enables a business to maximise its cashflow by ensuring cash is not tied up waiting on debtor payments. It can reduce the stresses and worries that can be caused by delayed debtor payments, in addition to reducing the burden of worrying about cashflow. A business can then focus its resources and energies on the core activity of the business and not get bogged down in day to day admin and financial issues. A key area that this improved working capital can be used for, is to pay suppliers quicker.

While not suitable for all businesses, it can be an effective way of releasing cash to support growth. Indeed, unlike other working capital solutions, as sales grow - so does the amount of available funding.