With increasing supplier and energy costs and a rise in interest rates, it’s vital that you understand your business cash flow. Your business cash flow can give you insights about the health of specific products or services and overall market patterns. In this blog, we provide cash flow tips for businesses. 

 

What is cash flow?

 

Cash flow is the amount of money flowing into and out of your business. A positive cash flow means that you’re making more money than you’re spending, while a negative cash flow means that you’re spending more than you’re making.

 

Cash flow is important because it affects your ability to pay bills on time and manage unexpected costs. If your cash flow is good, then you can take advantage of opportunities when they come up, such as hiring new employees or purchasing new equipment. But if your cash flow isn’t where it should be, then these opportunities may pass you by because you don’t have the resources available to take advantage of them.

 

So, now you know more about cash flow, here are our cash flow tips for businesses.

 

Perform a health check on your accounts

 

Performing a health check on your accounts will help you understand your cash flow and predict patterns. It’s important to note that you’ll need up to date accounts to do this. Using software like Quickbooks can help you track your cash flow in real time. Firstly, look at your profit and loss statement and check that your income is sufficiently covering your expenses. Accounts software can help you prepare cash flow statements so you can keep track of your income and expenditure.  

 

Creating a yearly budget will help you understand where you can save to cover the quieter months. You could also think about a flexible working schedule, new products or services or other activities that can help to tide you over.

 

Once you’ve seen your health check and budgeted accordingly it’s important to keep track of your income and expenses. Try to have a look at at least once a month so you keep on top of your income and expenses.

 

Cut back on unnecessary expenses

 

Cutting back on unnecessary expenses is another way to improve cash flow. Think about what you spend your money on, is it a necessary spend or a habit you can break? For example, do you buy coffee everyday? If so, consider cutting back or investing in a coffee maker. This one change could save you money and also reduce waste.

 

Using your accounting software, you can look to see if there are any subscriptions/memberships that you could maybe do without. Something that perhaps you signed up for but has no real benefit. It’s worth going through all of your outgoings to see where you can cut back.

 

Avoid late payments

 

It’s essential that you do pay your business expenses on time. Companies and organisations, such as HMRC can and will charge penalties and interest. This could potentially be an added expense that you really don’t need. Make sure all your bills are paid on time. You can set up regular payments, even with HMRC. If you think it would be easier to pay your tax monthly instead of a lump sum at the end of the year you can do so.

 

Keeping an eye on your customers and their payment habits is really important, this is your income after all. You shouldn’t ignore customers who regularly pay late or not at all. Using accounting software like Quickbooks means you can easily keep track of your customer payments. You can send reminders, track your customer payments and flag those that need to be chased.

 

Communicating with suppliers and customers

 

If you’re struggling to keep up with supplier/utility expenses it’s important to communicate with them. Usually, you can set up payment plans to help. All suppliers are different but it’s definitely worth having the conversation and keeping the line of communication open.

 

On the flip side, if you have customers who haven’t yet paid, don’t be afraid to give them a polite nudge – you can even set automatic reminders for invoices that are overdue with accounting software.

 

A healthy cash flow is the result of operations that run efficiently and smoothly. If you can implement some of the tips here in our cash flow tips for small businesses blog it should help you increase profits. Furthermore, it should help you make decisions regarding your marketing, customer services, product or service development and new customer acquisition. 

 

If you need any help with budgeting or planning for your business finances give us an email or call today.