Cash flow: The ring of fire for credit controllers?

World famous country music legend, Johnny Cash, is an unlikely finance guru, but he perhaps inadvertently uttered some of the truest words in business:

Sometimes I am two people. Johnny is the nice one. Cash causes all the trouble.”

Just to state the obvious, it is the last bit that is the key. When businesses struggle or fail, cash usually causes the trouble. Even the biggest and most successful businesses can find cash flow a problem, often due to length of time it can take to get paid by customers.

Perhaps Johnny Cash was a finance director in the making. Once your business starts to experience cash flow problems, it is tough to reverse the slide and it will feel like the flames start to get higher and higher. When he sung about falling into the ring of fire, did he have in mind the problems that cash flow issues can cause? Probably not, but he had a point, even if not the one he was trying to make.

Cash flow is crucial to your business and crucial to your customers’ businesses. The more cash they have available, the quicker you get paid and the more cash you therefore have at your disposal.

So it is positive that the Lloyds Bank Business in Britain report has found that the number of businesses experiencing difficulties with their cash flow is falling as the economy begins to improve.

The science bit….

The survey conducted by Lloyds Bank questioned 1,500 small and medium sized businesses. It found that less than one in five businesses (17%) now report facing difficulties with cash flow. This is a big drop from three years ago when the figure was standing at 35%.

Cash flow is a major aspect of all businesses and Donald Kerr, Managing Director of Lloyds Bank Global Transaction Banking commented that “… the fact that relatively few have got concerns in this area is very positive…” Positive it most certainly is.

Geographically the area’s most likely to be experiencing cash flow issues are Gloucestershire, Oxfordshire and the South Midlands (23%), and perhaps surprisingly the least likely is Scotland at just 8%. But wherever you or your customers are based, everyone will benefit from increased levels of cash flow.

Lloyds Bank added that late payments are still a grave difficulty for businesses. Donald Kerr suggested that businesses should consider “…widespread adoption of the Prompt Payment Code … (the) need to carry out thorough credit checks on customers and set out clear payment terms at the outset of any relationship”. We agree, and our free credit management and debt recovery toolkits contain tips such as these and many more.

We have also created our innovative and interactive free 5 minute credit management audit, which will help you identify where you are at risk of cash leaking from your business.

So take heed of Johnny’s warnings – don’t let cash cause all the trouble and keep yourself away from those metaphorical flames.

For more information, please contact us on 01332 226 474 or email: .

Receive our toolkits

We have developed a series of credit management toolkits, including Knowing your Customer, Contracting T&Cs, Credit Control, Debt Recovery, Legal Enforcement and Pre-Action Protocol. These toolkits are kept up to date with current legislation and best practice by our team of solicitors and are easy to understand to assist you with compliance in your business.

Please enter your details and access to these toolkits will be sent to you via email over the coming days.

Leave a Reply