If you ask any experienced entrepreneurs what the most important factor is in the business, they will tell you – looking after the Cash Flow. Keeping your cash flow positive is crucial. I f you don’t have enough cash, you can’t pay your employees or suppliers , your business is at risk. According to the Office of National Statistics a poor cash flow is responsible for 90% of business failures.
In the current times many business owners face uncertain future.
The proper cash flow management is essential if you want to grow your business, many have learned that even to sustain the business this is absolutely essential.
Few principles of cash flow you should have in mind:
1. Make sure there is sufficient cash on hand to pay outgoings
2. Make sure the cash comes on time so you can pay suppliers on time
3. Develop a sound credit control system
4. Take care of Inventory management
5. Have a negotiation power to extend credit in case of a shortfall in funds
6. Having enough cash for investments in projects
To be able to manage you cash flow you need to put a cash flow forecast in place to enable you to analyse and predict your cash flow position in the next 3 to 12 months. This will give you an idea where your business will be financially. This may also give you an idea and time to put in place a strategy in case you may find yourself in difficulty. Ask your accountant to suggest ways how to approach it efficiently.
Cash projection reports can be prepared manually or by addons to a software. Manual cash flow preparation can be practised in small not transition heavy business. However in organisations with a lot of transactions and different payment options there are more efficient ways to generate this report.
It cost money to run a business. When your business grows so does the complexity of running it. Create a cash flow statement to give you a picture of the cash position of your business.
Few points worth mentioning and implementing in your business are here:
Timely management of payments you owe to your own creditors. You can achieve this by categorising your expenditure into non-essential, good to have in normal times and absolute essential.
2. Make it easy for clients to pay on time.
Try this few ideas:
Invoice immediately after the job has been completed or goods posted.
Offer many ways to pay: direct to bank, PayPal, Sage Pay or Stripe
Have an option on your invoicing software to see when customer opened your invoice
Set up regular payments if possible with fixed fee clients. There is software to help you with that like Go Cardless or ucollect.
3. Getting a cash bust
You could make savings by changing a bank or a utility provider
Arrange a better payment terms with your supplier.
Short term loan facilities like overdraft are useful but not a long term solution.
By developing a good relationship based on trust with you bank or lenders should your business need future financial position.
There is an Invoice finance option which allows you receive advanced money from bank based on your invoice value, it released tied up working capital.
4.Choosing the right payment gateway.
If you receive payments by cards or online your need to choose a provide good for your purpose. Worth checking is how much does your provide charge for fees & how quickly funds get deposited in your account.
If you are owed money and are struggling with being paid. Here is what you can do
Current legislation allows you to add late payment interest and fees to all commercial transactions. The Late Payment of Commercial Debts (Interest)Act 1998 allows you to add 8% interest, fixed fees and reasonable cost of recovery to every invoice you issue. The fixed fees are £40.00 for invoices up to £999.99, £70.00 for invoices up to £9,999.99 and £100 for invoices £10,000 and above. If they still refuse to pay you can make a claim up to £10,000 online in Small claims court.
If you need help with cash flow report please let us know and we will you with setting something in place.
Greenlight Team 😊