One of the questions Steven Glicher’s accountants are often asked is how can businesses improve their cash flow?
Well, the simple answer to the question is that businesses need to stay in control if they want to run smoothly and be profitable. However, staying in control of your cash flow is probably more of a challenge than many businesses fully appreciate. In fact, we’d go so far as to say that controlling cash flow is one of the biggest challenges that small businesses face. So, here are some tips that will go some way to improving your business’ cash flow.
Good credit management.
Far too many businesses only produce a set of accounts on a yearly basis, and they rely on this information too heavily. The problem is that most businesses will struggle to keep their cash flow healthy if they are relying on information that is no longer valid or appropriate. Many things can happen during the course of a financial year; dips in the market, a loss or increase of customers, an increase in supplier prices rising can all affect a business’ cash flow. Many things can change, and if these are not accounted for in the cash flow forecast, then these can cause issues for your business. Ideally businesses should produce monthly or quarterly accounts. These will provide far more accurate and up-to-date information about the state of the business, and will help you to monitor fluctuations and irregularities and react accordingly.
Keep your cash flow forecasts realistic.
Optimism and positivity are vital in business. Without these qualities and real determination businesses will not succeed. However, there’s a fine line to be drawn between being positive and optimistic, and being unrealistic. Over-ambition can prove to be a problem when it comes to cash flow management. Unrealistic goals can seriously undermine cash flow forecasts: they can lead to over spending, which, in turn, can result in businesses lacking the funds to be able to pay their bills on time.
Keep on top of your cash flow projections and regularly review your position.
Accurate cash flow projections can make the difference between having enough funds to make payments on time and not. Your business should be aware of when changes occur in your market place or if there are likely to be times in the year when business will be slower. Accurate cash flow projections will ensure that there will be sufficient funds available when payments are due, even during quieter trading times.
Making regular cash flow projections needn’t be complicated. These can be managed in a spreadsheet or from a digital export from your online banking. If you don’t feel at ease with this then your accountant will be happy to help you produce a professional cash flow projection for you.
Actively chasing payments is a necessary part of business if you are to keep your business healthy. It might not be your favourite pastime, but it’s vital none the less. If you don’t receive your payments on time, then this will ultimately have a knock on effect on your ability to make your own payments on time. Rather than confronting issues after problems have occurred and using debt recovery services, consider your options upfront when engaging with new customers. Payment services like Direct Debits, Standing Orders, accepting credit cards or running credit checks are all viable alternatives for you and can make your cash flow easier to manage.
If you would like to discuss any of the above points further, or would like more information on cash flow forecasting or cash flow management, then please feel free to contact us. Whatever your small business needs, speak to Steven Glicher accountants on 0161 485 8007.