Small Biz' Series (Ep. 4) - Don't let cash-flow catch you out!
Cash flow issues are one of the biggest reasons small businesses fail. And yet, it’s often something business owners don’t pay close attention to, until it's too late.
The problem with cash-flow
Business success is not just about making sales. You can be making high revenues, look profitable on paper, but still run into serious trouble if there’s no cash in the bank.
Common pain points are:
- Having your customers pay late,
- Spending money before cash is received
- Not knowing whether money is coming or going.
Any of this sound familiar? If so, don’t worry. You’re not alone. Here are some tips to help you improve cash-flow.
1. Invoice promptly and ALWAYS follow up
As soon as work is complete or products are delivered, invoice immediately. Delays in invoicing often lead to delays in payment.
Also, don’t be shy about chasing up late payments! You did the work, so you deserve to be paid on time.
2. Make it easy for customers to pay
Use cloud accounting software that allows online payments, reducing barriers to pay. Platforms like Stripe or Go-Cardless enable people to pay through Apple or Google pay, which removes the barriers for payment.
3. Understand your outgoings
Know exactly what’s going out each month. Whether that be direct debits, subscriptions, or loan repayments, ensure you’re fully aware of all of these. If you have any subscriptions that aren’t being utilised, get rid of them!
4. Build a cash buffer
As I’ve mentioned in earlier blogs on personal finances, the similar concept can be applied to your business. Aim to keep a few months’ worth of expenses in reserve, to cover for any low activity periods.
Banking apps such as Monzo allow you to create pots to automatically save money to one side for tax pots, dividends, or rainy-day funds. Utilise them, and you won’t have to think about it!
5. Use cash flow forecasting
So often in the world of accounting/tax, we can be so focused on what has happened, rather than looking ahead as to what will happen.
Having knowledge of what’s coming in, what’s going out, and when, can be super beneficial for projecting your company's performance over a time period.
Need help with your cash-flow?
We help small businesses like yours understand their numbers, set up better systems, and get control of cash flow, all without the stress.
If you’re struggling to stay on top of your finances, get in touch through our contact forms in the website banner above. We’re here to help.