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    To discuss how we can support your business by making more of its working capital, please speak to your relationship manager or email us

     
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    How you can make sure your business has enough working capital

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  • Exporting can stretch your cash flow as your trade cycle increases. Check out our 5 strategies to optimise your cash flow.

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  • How to improve your working capital position

    • 1. Begin with a review

      Effective management of working capital should begin with a review of your cash management processes, practices and systems. Take a thorough look at how you are working today and how you compare with your competitors. For companies with a turnover above £3m, our Working Capital Tool can assess your current position and benchmark you against your peers. Once you know your weaknesses, you can make improvements in areas such as invoicing, tracking late payments, stock control, and extending your own payment terms.

    • 2. Accelerate cash conversion

      How long does it take your business to generate cash? A lengthy cash conversion cycle – i.e., the time between purchasing inventory through to receiving payment from sales – can starve a business of cash. The quicker you are paid, the better your cash flow. Focus on bringing cash back into the business as quickly as possible by automating and accelerating the cycle, raising and sending invoices in a timely fashion and collecting outstanding sums efficiently.

    • 3. Monitor suppliers

      Reviewing your suppliers can help you check that they’re delivering value for money and that their payment terms are in line with your cash conversion cycle needs. For example, if payments to suppliers are due before you receive payment from your customers, it will impact your working capital cycle. Discounts for early payment may sound tempting, but if they mean you’re exceeding your overdraft each month, they may be costing you. Reviewing contract terms is also important, particularly if you’re tied to fixed supply quotas but customer demand varies, otherwise you’ll be paying for stock to sit around.

    • 4. Reinvigorate your processes

      Make the cash in your business work harder by tightening up processes for both income and expenditure. For example, review your procurement processes to make sure you benefit from potential discounts, and take a look at your stock levels to spot slow-moving or obsolete items that could be removed from your product line. Forecasting demand can help ensure orders are fulfilled on time but excessive stock holding is avoided. You may also want to consider whether alternative stock and production methods, such as just-in-time processing, could work for your business.

    • 5. Evaluate your sales strategy

      Maximising sales and boosting add-on sales to existing and potential customers can improve your cash position, as long as you’re balancing that against the increased costs of servicing those sales and making sure you’re paid on time. A clear pricing strategy that’s regularly reviewed can also be effective, particularly if products are proving hard to shift, or where you’re attempting to gain competitive advantage, or corner a market. The key is to keep cash flowing through your business.

    • 6. Understand new markets

      Global trading conditions and payment terms vary widely and can increase your cash conversion cycle. For any company trading internationally, it’s vital to understand different payment cultures and work practices. Lloyds Bank is holding trade fairs to highlight the issues, and our International Trade Portal provides a comprehensive overview of trading risks. Financial benchmarking will help to identify opportunities, and digital tools such as data-driven diagnostics can improve working capital processes.

    • 7. Manage your cash

      Effective cash management can help your money work harder. A blend of instant access and fixed term deposits means you can optimise returns and cash availability. Understanding where you have excess cash that can be put to use is important in making your cash work harder, earn the best returns possible and help you achieve your short and longer-term plans.

  • Talk to your relationship manager about how we can help you unlock up to 5% of your turnover through management of your working capital. Get in touch

Important legal information

Calls may be monitored or recorded in case we need to check we have carried out your instructions correctly and to help improve our quality of service.

Lloyds Bank plc Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Telephone: 0207 626 1500.

Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 119278.

Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Please note that due to FSCS and FOS eligibility criteria not all business customers will be covered.

Lloyds Banking Group includes companies using brands including Lloyds Bank, Halifax and Bank of Scotland and their associated companies. More information on Lloyds Banking Group can be found at www.lloydsbankinggroup.com (opens in new window)