2017-02-23 04:33:07CashflowEnglishStaying on top of cashflow management is key if you want to make effective business decisions based on the state of your finances.https://quickbooks.intuit.com/uk/resources/uk_qrc/uploads/2016/10/All-You-Need-to-Know-About-Using-an-Online-Payroll-Service-featured.jpghttps://quickbooks.intuit.com/uk/resources/cash-flow/balancing-cashflow-management-small-business/Balancing cashflow management in your business

Balancing cashflow management in your business

2 min read

Successful cashflow management is balancing how much, and when, funds come into your business, against what you need to spend and when. It sounds simple, but the reality can be tough for small businesses with tight budgets, late payment of invoices and employees to pay. There are some basic steps you can take though to understand the cashflow management cycle in your business and keep your books balanced.

Start with a detailed cashflow management forecast

How long is the initial capital you have to start your business going to last before you need new money to come in? This includes buying stock, paying your regular outgoings (such as premises, staff, loan payments) and understanding how long it will take for you to get paid by customers. If you’re running a shop or selling online then this will be much quicker than a consultant who invoices after finishing a project. Try and project your cash flow for the first year and include the seasonal fluctuations in your workload/ sales and key dates, such as submitting tax payments or when you will need to buy seasonal stock.

 Know your current cashflow management situation and have a plan B

Although it might feel quite precarious at times, knowing your current cashflow management situation will only help you in the long run. If you haven’t made as many sales as you predicted or it’s taking you longer than expected to get paid, you need to update your forecast and make sure you have enough money to meet your commitments. At this point, what is your contingency plan? If you don’t have a contingency fund and need help from your bank, then it’s best to talk to them in advance of cash flow becoming a problem and they are more reluctant to lend to you. Know what your overdraft and credit options are and how much they will cost you.

Invoicing best practice

Making it as quick and easy as possible for your invoices to get paid is plain business sense and makes you look more professional to your customers.

  • Make sure you invoice for your goods or services as soon as they are supplied and you send them to the right person. Make sure they are fully itemised (include the purchase order number if one was issued) so customers know exactly what they are paying for and payment won’t be delayed because of queries
  • Put your payment terms clearly on the invoice. 30 days is standard practice but some companies can take up to 90 days to pay. If your customer has different terms, discuss them upfront as some companies have schemes to pay small suppliers more quickly
  • Keep track of when invoices become outstanding. As soon as they do, ring the accounts payable contact to see what the delay is. It helps to build a relationship with this person over time so they are more willing to help

How can you generate more regular income?

It can be feast or famine at times for small businesses and this unpredictability can cause cash flow headaches. Ways you can bring some certainty into your cash flow include agreeing to payment schedules on larger projects, such as invoicing 50% of the total upfront, and having fixed rate payment options such as a retainer for a certain number of hours/ days work each month. If you’re just looking to get paid faster, you could offer a small discount to customers if they pay within a certain timeframe.





Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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