You’re a business owner. You probably know that good cash flow management is vital to growing a healthy business. You’re also probably well aware of when your own business is facing a cash flow problem. What many business owners won’t be aware of, however, is how to tackle the crisis once identified. What do you have to do to turn a cash flow problem around? And how can you manage it effectively to prevent a problem in the first place?

1. Understand the difference between cash flow and profit

‘Profit is sanity, but cash is King’

You may have heard us cite the famous phrase in our dedicated article: Turnover is Vanity, Profit is Sanity, Cash is reality. Making a profit is certainly important for long term prosperity, but without cash, you have no business! You may be left wondering, ‘how is my business profitable, but tight on cash?’. Many businesses have forecasts for profit margins years ahead, but don’t get a cash flow forecast in place from the get go – a common reason for early business failure.

Skip the steps of creating your own cash flow overview by downloading our Free Five-Minute Cash Flow at the bottom of this page to see exactly how much available cash you have and how much you ought to have.

2. Get some accurate management accounts

Cash flow confusion will continue if you don’t have or don’t understand your management accounts and what they’re telling you. If you use a computerised bookkeeping package (and the impending Making Tax Digital rules will mean that you need to!), then your system is capable of producing reports which show you how your business is performing and help you to identify small problems before they become big ones!

Find out how other business owners are using their data to grow their business with monthly or quarterly Management Accounts.

3. Make sure you are making a profit

Once you have some reliable management accounts you can start to think about profitability. Do you have enough customers, are you getting enough work from them? Are you pricing too low, or too high? Also, review the costs your business incurs and consider whether you are getting the best value for money. Look to negotiate better prices with your suppliers. Do you need that big office with the huge rent bill for your small group of employees?

4. Free up your time for strategy

Every minute that you’re getting lost in the day to day operations of your business, picking up slack and sweating the small stuff, you’re not spending time on medium or long-term strategy. Before you know it, another week has passed, a month, a year, and you still haven’t had a chance to sit down, assess the reality of your situation and set goals for your business’ future.  Make your business less dependent on you, by using our techniques for effectively delegating, and using technology to take the work off your hands.

5. Get that invoice out!

As Benjamin Franklin and the entire business community would say: Time is Money. And time really is money when it comes to getting your invoices out quickly after you’ve completed the work. Whether you have short or long payment terms, your customers aren’t even going to start thinking about paying you until the invoice is in their hands. So, get it into their hands ASAP!  It goes without saying that sending an invoice via email is quicker than by post, but there are now far more advanced tools that speed up the whole process of payments in and out. Moving to a Cloud accounting software will drastically reduce the time you spend on invoicing, with the added flexibility of being able to do it on the go! Which cloud accounting software should you use?

6. Get paid faster!

Sounds like a repeat of point 4, but it’s not. You may have got that invoice out the door like Speedy Gonzales, but if you have limited options for quick payments, you’ll still be playing a waiting game. Make sure your payment terms are set out before you start the work and confirm in writing. When it comes to the process of paying, there are now plenty of secure online payment services you can offer your buyer that don’t leave you hanging on a cheque. We recommend GoCardless, an online direct debit service that takes control of the whole collection process on your behalf.

See the magic of GoCardless and how it can work for you

7. Automate your credit control

One of the most damaging factors to your cash flow is poor credit control, and when we work with businesses, we often we find very stressed credit control managers exhausting themselves to reduce the cost of debt recovery. You can drastically cut the pressure and reliance on your staff by setting up an automated system to chase those habitual late payers. We tell all of our clients about Chaser – a simple to use software that has completely transformed our own credit control.

Here’s how we reduced our client’s time spent on credit control by 90%

8. Ensure your business is financed in the right way

These are some of the first steps you can take to improving your cash flow management and avoiding a crisis. But there are other areas of the business you could look at improving to keep your flow of money in order, from looking at the most cost-effective ways to market your business, to maintaining a good relationship with your bank.

There’s a lot to consider here, we know! So we’ve put all these considerations into an ‘Improve and Grow’ session where we will identify the areas where improvements can be made in your business and provide an action plan to see it through.

Don’t be afraid of your finances.

Register your interest at the contact form below.


Cashflow Forecast Template

  • By ticking this box you agree to being contacted via email or phone by one of our Advisers, and for the information you provide us with to be kept securely for future communications in line with the new GDPR
  • This field is for validation purposes and should be left unchanged.