Cash is always king but during challenging periods cash flow management becomes even more crucial. With tax rates rising and inflation meaning you get less for your money, it’s essential you are managing your cash flow effectively.

There’s only so much you can do as a business owner to encourage more business and therefore more cash flow inflow. But what you can do is learn how to manage your cash flow effectively by following our tips below and keep a close eye on it so help you make informed business decisions.

[1]. Understanding Cash Flow and the difference between cash flow and profit 

Cash flow is the movement of money in and out of a business. It’s the financial lifeblood of any organisation, and it’s essential to the success of a business. A positive cash flow means that the business has more money coming in than going out, while a negative cash flow means that the business is spending more money than it’s bringing in.

You may have heard us cite the famous phrase in our dedicated article: Turnover is Vanity, Profit is Sanity, Cash is reality. While cash flow is related to profit, it’s not the same thing. Profit is the difference between revenue and expenses, while cash flow is the actual amount of cash that’s available to the business. Businesses can have positive profits but still experience negative cash flow if they’re not managing their finances effectively.

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 by filling in the form below to see exactly how much available cash you have and how much you ought to have.

Xero and QuickBooks online clients can also get a more detailed cash flow that can be updated weekly, monthly or whenever you need by using Float as part of our cash flow service. Talk to your Principal Adviser (or call us on 01474 853 856) to hear more about our cash flow service and Float.


5 Minute Cash Flow Forecast Tool

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[2]. Get some accurate management accounts 

Having accurate, up-to-date management accounts are critical for managing cash flow. Management accounts are an insightful, in-depth analysis of your data. They are invaluable for helping you spot problems before they become serious problems in your business. By having access to this date you can spot:

  • Patterns in sales that may need strategy
  • How you are growing
  • Which products or services are giving you the best return (so you can focus on growing these)
  • A list of customers who owe you money and suppliers who you owe money to
  • What’s going well and what isn’t, and how you’re measuring up to your targets

Get in touch with us and we can discuss what your management accounts need to look like and provide you with a personalised quote. We can either work with your bookkeeper or refer you to our in-house bookkeepers at A4G Bookkeeping.

[3.] Calculate your real break-even point

The phrase “real break-even point” refers to the level of sales you need to cover your costs and leave enough profit to cover tax and the drawings you need to live on. Conducting a breakeven analysis is vital to:

  • Determine the levels of sales you need to cover costs. It helps you set your sales targets
  • Aid you in making informed business decisions about pricing of your products and services
  • Identify where you need to control costs and reduce expenses
  • Consider whether you need to reduce your drawings

Calculating your break even point is crucial to arming you with valuable financial insights to make informed business decisions on pricing and costs and improving your profitability. If you need help calculating your break even point, we have a break even calculator we can send to you or we can calculate it for you! Email us and 01474 853 856.

[4.] Get your invoices out immediately 

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.

[5.] 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. Given the current climate, for those with poor credit ratings you may want to get a deposit paid upfront too.

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.

[6.] 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.

For more advanced and bespoke automated chasing, 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% using Chaser.

[7.] Ensure you are using the best accounts package for your business

The right accounts package is key to preventing cash flow problems. By ‘right’ we mean a software that has the potential to alert you of any problems that are likely to arise, before you find yourself drowning in the middle of it all.

We use Xero, which gives us real-time access to all our numbers, which is the key to being in complete control of your cash flow. The Xero dashboard is a one-stop-shop for all your critical numbers and key performance indicators (KPIs). You can easily see:

  • What your costs are for the month – i.e. your bills
  • What invoices are due for the month and your total income expected
  • Which invoices are overdue
  • An overview of cash in and cash out for each month

Xero, of course, isn’t the only accounts package on offer. There are several factors you might want to consider before you make a choice out of the wide selection on offer today. Take a look at our top three recommendations and our list of pros and cons here.

[8.] Claim all Allowances and Deductions

Make sure you’re claiming all the allowances and deductions that you’re entitled to. This includes claiming capital allowances for equipment and machinery purchases and claiming expenses for business-related travel, accommodation, and meals. You can also claim deductions for any charitable donations made by your business.

Also, take advantage of the Annual Investment Allowance (AIA) to deduct the full cost of qualifying plant and machinery from your profits before tax, up to £1 million per year. This valuable tax relief applies to most plant and machinery, including computer equipment and office furniture.

[9.] Consider Research and Development Tax Credits

If you’re engaged in research and development (R&D) activities, you may be eligible for tax credits. This tax-saving tip is designed to encourage innovation and growth in the UK economy. It allows businesses to claim a tax credit of up to 33% of their R&D expenditure, depending on the size of the company and the type of R&D activity.

We can help you assess the likelihood of an R&D and maximise your claim. Get in touch for a free 1:1 now at or 01474 853 856.

[10.] Set aside some time to work ON your business

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 and get tasks and responsibilities sitting with the right people.

Don’t be afraid of your finances, get in control of them!

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. To find out more about this and book in your session to start getting on top of your cash flow, enquire about this using the form below.

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