If you run a small business, you’ll know first-hand about the challenge in managing cash flow. At Tax Agility, we have witnessed many cases where business owners are certain about achieving sales targets and profitability by the end of the year, yet they encounter negative cash flow in the process, hampering their growth plan or even putting them out of business because they cant pay their bills.
Cash flow management is essential, and this is where we can help. Apart from bookkeeping and accounting services dedicated to small businesses across London, we also offers management consultancy where we work with you in two specific areas:
- Business plans, forecasts and projections
- Credit control and cash management procedures
With that in mind, we’d like to share some top tips in helping you manage your cash flow.
1. Focus on Cash Flow, not Profits – you probably have heard this from other entrepreneurs and it really is a golden rule. The first step is to create a cash flow worksheet, tracking each payable and receivable for the next week, next month, next quarter, and the whole financial year. Use Excel, or other software to help with the task. After a while, you can definitely see the payment patterns from your clients and your vendors’ patience; while you become good at planning, from spotting new opportunities to anticipating expenditures.
2. Collect Receivables – we all know the downside of people not paying your bills on time. So here are some helpful tips aiming to motivate clients to pay up quickly:
- Require a deposit payment at the time of order whenever you can.
- Issue invoices promptly.
- Offer discounts to clients who pay their bills within a certain time period (like during the first 5 days).
- 1 week before the due date, follow up with a reminder.
- If clients are still not paying after the due date, follow up with a phone call.
- If you know a particular client who is slow in paying their bills, then you can either impose a late-payment charge or institute a cash on delivery policy.
3. Surviving Negative Cash Flow – getting an overdraft from time to time to tide yourself over a challenging period is not usual. The bad news is bank may not want to approve your overdraft; but the good news is the UK government has passed an Act which now requires the UK’s nine major banks to refer you to an alternative provider (if they refuse to finance you).
In fact, there are three online platforms pre-approved to receive these referrals and help small business owners with financial options. They are: Funding Options, Business Finance Compared and Funding Xchange. These online platforms aim to make the financing process clear, easy, and transparent – you even have the control to choose which lenders you want and the payment terms. Apart from the standard loan, you can also try Invoice Financing, whereby you draw money against sales invoices before customers pay.
If you want to know more about managing your cash flow and how we can help, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.