It’s a familiar story of a brilliant idea, of skilled and savvy entrepreneurs who have spotted an opportunity in a market, but when it comes to running their business they can often fall short, warns Evette Orams of Hilton-Baird Financial Solutions

For some owner-managers, while they are experts in their field, they either don’t have the time to focus on managing their business cash flow or adequate financial expertise to leverage the right level of working capital for day-to-day activities.

Sooner or later owner-managers have to review their strengths and make a decision. Are they going to juggle everything or identify those with the skills required to assist, be it external advisors, financiers or employ an expert in-house to run the financial side of the business? They need to fill the gaps around them with quality people as it’s difficult to be good at everything.

Facing potential cash flow ‘holes’ earlier can prevent owner-managers from going out of business. They need to face the issues head-on and deal with the problem because it’s not going to go away.

Businesses are being squeezed by higher input costs for raw materials and utilities, while banks are being more cautious with lending and requiring more security.

In the last five to ten years, businesses have had the luxury of good cash flows rather than having to think about how to make ends meet with suppliers. Today the situation is wildly different. Many companies are running out of cash and finding themselves in a situation where they have to carefully consider how they will manage their cash flow more effectively for survival.

We encourage owner-managers to look at the cash flow challenges in advance, rather than wait for the inevitable to happen. It’s a process of making them aware of the different types of finance available to them, other than traditional bank lending, such as asset-based lending.

When a company’s assets have already been pledged for existing borrowing, turnaround equity can bring crucial capital into the business. This may be the last thing an owner-manager wants to do, but it can offer a route for survival and investors can bring additional skills into the business to effect a turnaround.

Often turnaround equity can be the best solution, rather than losing everything. However, we would urge business owners to tackle cash flow issues early to increase their chances of survival.