Keeping in control of your cash flow is essential for running a successful and profitable business and it's one of the biggest challenges facing small businesses today. We've collaborated with FA Simms & Partners to provide you with some top tips on how to improve your business' cash flow.
Good credit management
Many business owners rely on information in their annual accounts. However, problems with cash flow and a lack of regular accounts to provide important information about your financial position could be a key reason why more assistance is needed.
How can business owners keep on top of their cash flow if they are having their accounts done once a year? Many things happen within a year that affects a business' cash flow like dips in the market, a loss or increase of customers, increase of customers and supplier prices rising.
There are many things that can change and if they are not accounted for in a cash flow forecast then it can cause issues for your business. Having monthly or quarterly accounts will help you keep a close eye on these fluctuations and react appropriately.
Many business owners start their role with a positive and ambitious outlook. It's important to have a positive attitude in order to have the determination to succeed, but this ambitious outlook needs to be tempered when it comes to creating an appropriate cash flow forecast.
By not having a realistic view of your cash flow, it can result in over spending which can cause your business to lack the funds required to make payments on time.
Make regular cash flow projections
Making cash flow projections can be the difference between having enough funds to make payments on time and not. It is worth noting when changes occur in your market place or if there are certain times of the year when you know business will be slower. These projections will help them ensure enough funds are available when payments are due even during quieter trading times.
Making regular cash flow projections needn't be complicated. This 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. Not receiving your payments on time, may have a knock on effect to making your payments on time. Late payments can affect all parties involved.
While you can engage in debt recovery services who will contact customers on your behalf, it can be useful to look at your options when engaging with a new customer right at the start. Payment services like Direct Debits , Standing Orders, accepting credit cards or running credit checks are all viable alternatives for you.
These quick tips highlight a few areas where you can help ensure that you are never left uncertain about your cash flow situation.
If you would like to discuss any of the above points further you can contact one your local TaxAssist Accountant today who will be happy to help you and your clients with any questions you have regarding the information in this article.
With thanks to FA Simms and Partners who provide business rescue solutions to small and medium sized businesses.
Last updated: 23rd October 2013This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.