Basic Small Business Cash Flow Management: Managing Your Income And Expenditure.

Tips for better cash flow projections for start-up businesses.

One of the biggest problems for any start-up business is the effective management of cash flow. It’s vital, however, that any small business learns to do this as quickly as possible as it could make the difference between survival and failure. However, not all small businesses have the time or resources to be able to keep on top of their cash flow projections, budgets and business projections. That why Steven Glicher accountants offers a tailored cash flow management service for start-up and SMBs. Let us take the strain, so you don’t have to.

Effective cash flow management is critical to business survival. It is vital to reduce the time gap between expenditure and receipt of income to ensure you always have the necessary cash to pay for your day-to-day business costs.

Customer management.

Ensuring your customers pay you on time and in full is crucial to maintaining healthy cash flow. To aid this, start-up businesses need to:

  • Define a credit policy that clearly sets out your standard payment terms.
  • Issue invoices promptly, and chase outstanding payments regularly.
  • Consider charging penalty interest for late payment.
  • Consider offering discounts for prompt payment.
  • Negotiate deposits or staged payments for larger contracts.
  • Maintain a good relationship with your customers so that you can spot any signs that they are in trouble as early as possible.

Supplier management.

  • You could ask your suppliers for extended credit terms. Giving your suppliers incentives such as large or regular orders may help, but make sure you have a market for the orders you’re placing.
  • Alternatively, you could consider reducing stock levels and using just-in-time systems.

Taxation. 

  • As a business, you may be liable for several taxes including Income Tax, Corporation Tax, VAT, business rates and stamp duty. It is important to keep good records to help you calculate your liability and complete your returns accurately.
  • If you are registered for VAT, it makes sense to buy major items at the end rather than the start of a VAT period. This can often improve your cash flow, because you can offset the VAT on the purchase against the VAT you charge on sales. This may help you to manage a temporary cash flow shortfall.
  • If you are concerned that you may not be able to pay amounts that are owed or will soon be owed to HM Revenue & Customs (HMRC), you can contact the HMRC Business Payment Support Service Helpline. HMRC staff will review your situation and discuss temporary payment arrangements tailored to your business’ circumstances.

Asset management.

You could also consider leasing fixed assets and equipment, or consider buying them on hire purchase. Buying assets outright can place a huge drain on cash in the early years of business, so it can sometimes be more cost-effective to lease them instead.

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