10 Ways to Improve Your Cashflow and Stay on Top of Your Finances

From monitoring cashflow gaps to speeding up payments, here’s key tips to help you manage your business’ finances effectively

10 Ways to Improve Your Cashflow and Stay on Top of Your Finances

We’ve all heard that old adage ‘cash is king’ but it is still relevant today or perhaps, in this competitive, fast-moving world, it is even more important. Without a steady flow of cash, your business will run into serious trouble. You won’t be able to pay bills or your staff, make purchases or plan for the future.

Here are 10 ways to improve your cashflow and boost your financial efficiency:

Forecast your business’ cashflow

It may sound obvious, but it is surprising how many businesses don’t maintain an accurate cashflow forecast. Look at how much cash is coming into your business each month (cash inflow) and how much is going out (cash outflow). With a regularly updated forecast in place, you should be able to identify seasonal peaks and troughs and plan business activities to ensure there is always cash to make payments.

Mind the finance gap

Good cashflow management is all about creating a balance between those cash inflows and outflows. Gaps appear when there is more money going out the door than coming in, leaving your business short. Spot the gaps before they become gaping holes by taking proactive action e.g. chase overdue invoices; negotiate new payment terms with suppliers, etc.

Speed up your cash conversion

Convert your products and services into cash as quickly as possible. The sooner you collect cash, the faster you can use it to increase profits or meet financial obligations such as wages or debt payments. Tips for speedier cash conversion include: start sending out invoices immediately after the delivery of goods or services; change your payment terms from 60 days to 30 days and consider offering a small discount to customers who pay their bills early.

Make it easier for customers to pay up

Fed up waiting for business cheques to clear? Reduce delays by creating more accessible ways for your customers to pay right away – such as setting up, and then encouraging, online payments.

Create a collections process

Stay on top of overdue payments. Late payments remain a massive issue for small and medium sized businesses; hindering growth and harming business continuity plans. Many companies operate a system of reminders that become gradually more serious and formal as invoices become more overdue.

Offer credit cautiously or it could be your business’ downfall

Proceed with caution when it comes to offering lines of credit. According to Dun and Bradstreet, more than 90% of companies grant credit without checking references. Failing to do your homework and checking references puts your business at risk, saddling you with non-paying customers and racking up bad debt.

Keep an eye on your company’s cashflow continuously

It has been said ‘look after the pennies and the pounds will look after themselves’. If you don’t have a finance manager, consider training an employee to monitor cashflow on a daily basis to ensure there is always sufficient cash in the bank.

Plan for any cash shortfalls

Have a strategy in place to meet any cashflow bottlenecks head on. A good, old-fashioned bank overdraft facility may help to tide you over or a short-term loan. Don’t be afraid to shop around for the best deals and keep your bank informed over any big changes to your cash flow forecast.

Consult an expert

Sometimes we need help looking at the bigger picture. Working with a specialist bookkeeper or an accountant can be a valuable investment – providing insight into areas that you may have overlooked and helping you with you with your cashflow forecasting to anticipate and plan for cash flow problems.

Control business expenses

Look at ways to save money on expenses to improve your bottom line. If you don’t already, start tracking business expenses to stay on top of outgoings.

For more guides and advice on managing your business’ cashflow, have a look at our sister site here


By Sue Higgins, founder and managing director of Inspira UK

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