Over the coming months, all businesses will need to keep an eye on cash flow as they recover from the Coronavirus pandemic. They say, 'Cash is King', and this is more important now as we move forward over the next 12-18 months.
Keeping an eye on cash flow will make a big difference to you and will help ensure that there are funds available for wages, supplies and other expenses. We wanted to share with you a few tips that you can put into place to help manage cash flow. All these will help now as you recover from the pandemic. If used at all times in the business these processes can help you as your business grows.
Keep track of cash flow
Keeping track of your cash flow regularly, such as once a month or more frequently depending on the type of business you run is very important. If you use accounting software that is connected to your business bank account, this process can be automated. You should be able to generate a cash flow statement quickly, and by tracking this, you will be able to identify any cash flow problems in advance. By monitoring your cash flow, you will also be able to use the information to create a cash flow forecast for the months ahead.
If you have employees that are coming back to work after being furloughed this type of analysis is critical as you may not have the same level of funds available to you now as you did before lockdown.
Reduce expenditures
When you start looking at your cash flow, you will also be able to track all your expenditures. You may find that you are incurring expenses that are not needed now. For example, many businesses that were based in offices before lockdown have now decided that they can work as productively from home, so they don't need to incur the cost of having an office.
Also, it is an excellent time to get quotes for your ongoing expenses to see if there is a possibility of reducing the cost of services such as electricity, gas and broadband bills. For many businesses, the cost of printing can be high; there may be cheaper alternatives or even the possibility of creating a paper-free workplace.
Make it easy for customers to pay you
Over the past few months, many businesses have moved from taking cash to contactless payment systems. This has been easier for many customers and also helps keep track of income. If you sell products online, can you give more choices of how customers can make payments? The more options you give, the less likely you are to lose a sale, for example using PayPal, credit card, debit card or even GoCardless.
If you offer services and have to invoice customers, again have a look at how they can pay you. BACs transfer is always a good option, and if you can encourage customers to set up a direct debit or standing order, that's even better. PayPal and GoCardless can be integrated into your website, or you can use handheld card payment machines which may be better for some customers.
Reduce your payment terms
Most businesses offer 30 days as payment terms. This is usually fine, but it does mean that customers often wait until the end of the 30 days to make the payment. If you know that this will cause your difficulties, you could reduce the payment terms to 14 days or even seven days. In the current climate, if you explain this to your customers, they will understand why you have made the change.
If you often find that some customers pay very late or you end up chasing them for payments, then read our next blog. How to deal with late payments, this blog outlines some strategies for dealing with customers without affecting your relationship.
All these will help you to manage your cash flow. If you need any advice, particularly on forecasting and tracking cash flow effectively, please do contact us.
You can call 01623 490 120 or email