How to improve your business cash flow
Good cash flow forms an integral part of a successful business, as without it businesses can quickly struggle to maintain the running of their day-to-day operations. Find out how to improve your business cash flow.
In the current economic climate, businesses may face an uphill battle to keep cash flowing through their business, as customers or clients are also impacted by the UK’s ailing economy, and as a result may also experience challenges in meeting their financial commitments.
Here are a few simple and effective ways, for businesses to ensure that their cash flow remains at an optimum level.
Outline a clear system for customer payments
While many firms will be reluctant to turn away any custom, especially in the first few years of operation, ensuring that any new customers/clients are able to meet repayments will pay dividends in the long run.
This can be achieved through credit checks, or assessing customers’ effectiveness in meeting initial payments.
It is also crucial to set out clear payment terms, including the payment period and payment method, on invoices to avoid any confusion and to ensure that there are no unnecessary barriers to customers making payments on time.
Putting in place a concrete system for chasing outstanding invoices will also ensure that all payments are effectively tracked and made to your business.
Closely monitor sales
Use a simple spreadsheet to track sales and identify when payments for these purchases will hit your bank account; this will help businesses to tackle a situation where they could potentially be entering negative cash flow – when expenditure exceeds income – at the earliest opportunity.
Having a clear idea of how much money is in the business bank account at any given time, will also help to identify if measures such as a business overdraft need to be put into place.
Consider making cut backs
Trimming costs in a number of areas can help to free up money to plough back into the business. This can include anything from switching stationery suppliers to switching energy plans.
Existing suppliers may also be willing to give you a discount, rather than risk losing your business altogether.
If your business is having cash flow issues, you may want to seek out professional insolvency advice.
If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1143.