Good cash flow is essential for businesses to function effectively and helps with growth. We always support our clients to understand the importance of maintaining good cash flow, and we wanted to share some of our top tips in this article.
- Keeping all records up to date will help you with managing cash flow. One of the advantages of Making Tax Digital is that all businesses will need to start using software to record all their income and expenditures.
- Have a clear invoicing policy and make sure that the person responsible for sending out and monitoring invoices sent to customers does this promptly. It’s essential to start chasing invoices as soon as they become overdue to manage good cash flow. Often larger organisations have set dates for paying invoices, make sure you know what these are to help you manage your finances if there will be a long delay.
- You could offer a discount to customers to incentivise them to pay invoices early. This can be a useful strategy, but it’s essential to ensure that the discount doesn’t impact your profit margin too much. Some suppliers also offer a discount for early payment. It’s worth looking into this to reduce your costs.
- Reduce unnecessary costs. Regularly, you should review all your expenditures and ensure that they are all required for your business to operate successfully. There are always opportunities to reduce costs if you shop around, for example reducing your utility bills could make a big difference to your bottom line.
Developing a cash flow forecast can help you to manage your finances more effectively and help you when you are making decisions about growing your company. If you would like any advice on cash flow forecasts, please do get in touch by calling 01623 490 120 or email