Reviving a company starts with identifying the key issues, then redefining its strategy. By cutting costs, boosting innovation, and sharpening focus, you can breathe new life into the business and get it back on track for success. Let’s discuss ways in which you can revive a company.
Prioritise company cash flow:
The company cash flow is a great place to start. Essentially, it measures the movement of money coming in and out of the business. Positive cash flow is when the company has more money entering your business than leaving it. Negative cash flow is when you have more money exiting the company than entering it. As you can imagine, a negative cash flow can cause issues covering the company’s day to day operational expenses and funding its working capital. Working capital is calculated by subtracting current liabilities from current assets. While it includes more than just cash, such as accounts receivable and inventory, it provides insight into the company’s ability to meet short-term financial obligations.
Therefore, effectively managing a company’s cash flow is essential to maintaining profitability.
How can you improve cash flow?
To improve cashflow within your company you can look at the following areas:
Dont Buy, Lease
- Consider leasing rather than buying- you can choose to lease machinery and equipment, property and vehicles. This offers the benefit of the company spreading the cost of the asset over a longer period of time. This means you will make smaller monthly payments rather than daling with a large up-front cost.
Cut Expenses
- Cutting and reducing unnecessary expenses- identifying and eliminating expenses would be the another big step towards improving cashflow. It’s also important to review expenses on a regular basis. You can look into negotiating with your suppliers for more favourable terms such as offering discounts if you pay in advance, or extending your payment terms to reduce the amount of money coming out at one time.
Manage Inventory
Inventory is goods and services which can be sold, and is regarded as one the company’s current assets on the balance sheet as they can ususally be converted into cash easily within a year. Inadequate inventory forecasting causes poor inventory management, such as failure to predict the necessary future inventory that is required to meet consumer demands resulting in over or under stocking. Thus, the use of data is central to a successful forecast. You can either use historical data specific to company sales to predict further sales, or look into external factors like the current economic environment, market trends and seasonality to build an accurate forecast.
Keep an eye on Stock
The consequences of over and under stocking can be costly for your business. Excess inventory not only ties up valuable cash but also demands additional storage space incuring related costs such as insurance, all of which drive up operating expenses. Cash tied up in unsold inventory reduces the company’s available working capital, which could be better allocated elsewhere, ultimately impacting overall cashflow. Potentially, money that could have been better utilised boosting marketing, upgrading plant and machinery, or investing in the expansion of product lines.
Likewise, under stocking can directly impact sales and revenue when customer demand isn’t met and orders go unfulfilled, causing the business to lose out on potential sales. Especially if low stock is a recurring issue, it can lead to customer dissatisfaction and push consumers toward competitors who can meet their needs — ultimately damaging the company’s brand image.
Don't forget your Suppliers
Other than producing a stronger inventory forecast, what other solutions can be implemented to successfully manage inventory? Your suppliers are important. If your current suppliers are inconsistent and frequently contribute to low or no stock, this can place significant pressure on your operations. This may require turning to alternative suppliers, even at the expense of higher costs and longer delivery times in order to meet customer demands. To mitigate this, it's important to build strong relationships with reliable suppliers, regularly evaluate their performance, and consider diversifying your supplier base to reduce risk.
Assess the business model & innovate:
You can start by conducting a SWOT analysis of the current business model, which includes identifying the strengths, weaknesses, opportunity and threats for your business. You can then develop action plans to implement business strategies that can addresses the SWOT categories.
Reviewing the current products and services offered by your business and whether it is inline with market trends can also help immensely. You may want to even consider diversifying into different revenue streams by expanding your products into new markets, which can increase market share and potentially alleviate risks by reducing dependency on a single set of products and services or customer segment.
Communicate with creditors and debtors:
Being actively aware of the company’s trade debtors is vital - this is money owed to the company! It’s good practice to keep on top of the outstanding invoices and proactively follow up on overdue payments. You will be able to improve your cashflow if you send invoices promptly, after completing work or delivering goods. You can also consider offering discounts for early payments, which can encourage customers to pay their invoice amount ahead of time.
Other options are reviewing your payment terms, including the length of time after you issue an invoice you expect payment, or exploring whether your customer should pay a deposit upfront, depending on what service you sell.
Although this is money the company owes, negotiating with creditors can work to your advantage too. Seeking to extend payment terms or paying in installments could help to spread costs over time. But, it’s important to build a strong rapport and maintain open and transparent communication with your suppliers, as this demonstrates that you are a reliable customer, and helps maintain a positive relationship.
Refinance - seek funds:
Refinancing is a viable strategic option as it involves restructuring your debts to help reorganise your company’s financial responsibilities. You could consider proposing favourable interest rates or payment plans as mentioned above, or you could secure new finance through external investment sources such as business angels, director’s loans, crowdfunding or money loaned from family and friends.
Whatever path you chose, it's always wise to seek professional advice if your company is facing financial difficulty as it helps you fully understand the options available. Hopefully, this article has outlined practical approaches and strategies you can use to begin restoring your business with confidence.
