69
Graeme jones
HOTtopic
Graeme Jones is the head of
franchising for NatWest. Contact
him on 0800 092 9117 or email
franchise.retailbanking@natwest.com.
For further information about
funding, call the NatWest Business
Hotline on 0800 158 5977.
Grow with the fl ow
Tips from Graeme Jones on how to maintain a healthy cash fl ow
FRANCHISE ADVICE
W
E DON’T appear to be quite out
“In past recessions, those that
● Get paid: You must set clear terms of
of the economic downturn, but
suffered were those that failed
business and collect debts promptly. If you’re
regardless of when the UK does worried about being paid, consider stage
return to growth, one of the most important
to go out and get new customers
payments or even cash on delivery to reduce
issues facing franchisees will be the question of
and those that succeeded were
your risk of bad debts. You could also consider
how to manage their cash fl ow. NatWest research
the ones that did.”
offering an incentive for early payment.
reveals that two fi fths of businesses have no formal ● Look at your costs: If sales fall, avoid
cash management strategy and that almost a third taking on unprofi table business. Cutting your
had not taken any action to ease their cash fl ow issues. costs can provide you with the scope to reduce prices. If you
When starting up a franchise it is very important that your fi nances are take on big orders, you could be overlooking your smaller more
structured in the right way – what often causes businesses to fail is not profi table customers.
their profi tability, but their cash fl ow. With an established franchise you do ● Spread the risk: Don’t just rely on one or two customers.
have an advantage in that the business format is already proven and there In an economic downturn, all it takes is for one of your customers
is a network of people around you facing the same issues and, of course, to move to a cheaper supplier and your business is no longer viable.
you also have the support of the franchisor. Generally in past recessions, those that suffered were those that
The good news is that there is plenty of advice available and the main failed to go out and get new customers and those that succeeded
banks involved in the franchise sector remain supportive. There is also were the ones that did.
government support available in the form of the Enterprise Guarantee ● Take advice: There is plenty of support available and as
Scheme, which can be used when structuring your fi nances; a loan under a franchisee you have the advantage of asking other franchisees
the scheme can be used for working capital thereby providing a cash fl ow about their experience as well as your franchisor. If additional
cushion while you are establishing your franchise. Your bank will be able to fi nance is required, get in touch with your bank at the earliest
advise you about the scheme and how you may be able to take advantage. opportunity so that there is time to review your plans and
Having got your fi nances structured correctly at the outset doesn’t structure the fi nances appropriately.
mean that you can relax – you need to keep a close eye on your cash fl ow
– some practical tips on how to keep your fi nances healthy include: Finally, if you feel that you have not received a fair hearing about your
● Cash is king: Keep control of your cash fl ow by having the fi nancial requirements for your franchise, you could take advantage of the
right management information and systems in place. They’ll allow you hotline services that are now available. These scrutinise instances where
to act on warning signs before they become a problem. borrowing requests have been declined and ensure that every avenue
● Credit checks: Are your credit checks on your customers up has been looked into in the search for a responsible lending solution that
to date and monitor late payments. meets the businesses’ needs. ■
www.businessfranchise.com December/January 2010
BF069_HotTopic-Natwest-Dec/Jan09.indd 1 18/11/2009 14:52
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