No matter what the size of the franchise there will always be a time when cashflow problems are experienced. Keeping a constant eye on cashflow and ensuring that the business always has a positive level of free cash is vital to the ongoing success of the franchise. If you understand your incoming and outgoing cashflow then you can easily adapt to safeguard to prevent problems happening.
There is so much to consider when running your own franchise that often the monitoring and evaluation of cashflow often gets neglected. In fact, it should be a high priority as it enables you to consider your financial commitments whilst also helping you to plan for the future.
To assist franchises with understanding how to keep on top of their cashflow we are sharing 5 of our top tips.
- Forecasting
Make sure you have accurate forecasting which looks at income, costs, expenses and outgoings. Being able to accurately forecast will enable your franchise to make sensible business decisions regarding expenditure and income. You can also identify any risks such as long-term debtors and even predict when a boost in cashflow is need to accommodate for any shortfalls.
- Pricing
Taking a flexible approach to your pricing matrix can yield very positive dividends. You might need to adapt this to different sectors with more affluent areas willing to pay a higher premium. Also, if margins for some products or services are low then consider a temporary suspension or a replacement for a more cost effective and profitable alternative.
- Invoicing
Stay on top of your invoicing and make sure that you get paid in accordance with your franchise terms and conditions. Don’t delay in sending out invoices and keep a track of when payment is received. Be strict with late payment, allow a little margin for flexibility but only a limited time scale which won’t have any adverse effect on cashflow.
- Positive Relationships
Make sure you build positive relationships with suppliers and customers. Try to build in some flexibility with suppliers so that payment terms fit your specific needs and offer extended timescales. Flip this for customers and try to encourage customers to be prompt with their payment.
- Seek Financial Help
Don’t lead your franchise into financial difficulties. There are many viable options that can help you with a cashflow boost. If you need to purchase new assets explore asset finance, if you need a new property look at a commercial mortgage, if you are looking for immediate payment from invoices utilise invoice finance and if your daily income is through card payments explore the benefits with merchant cash advances. Speak with a finance broker whenever you need an injection of cash.
If you have any questions with how to positively manage your franchises cashflow then we have a team of experienced franchise finance specialists available to help. Please call us on 01993 706403 or e-mail hello@ngifranchisefunding.co.uk.