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STEP 4
Keep your cash flow healthy
Aiden Corcoran
Head of Tax Support at GoSimpleTax Limited gosimpletax.com
Aiden Corcoran
“Cash is king – it’s the lifeblood of all businesses. If you haven’t got enough cash to pay your bills when they’re due, it could soon spell the end for your business. Even profitable businesses have found that out to their cost. Keeping your cash flow healthy must always be a key priority. “Cash flow isn’t just a matter of not spending more than you make. It’s also about ensuring that you’re paid on time. Your cash flow is positive when there’s a surplus of cash in your business; it’s negative when there isn’t. Effective cash-flow management takes hard work and commitment, but it can save you lots of time and hassle, while providing the funding you need to grow your business. And rather than worrying about your cash flow, you can concentrate on other, less stressful things. “Good cash flow management begins with limiting your costs, so don’t buy things you don’t need and negotiate best-value deals with your suppliers. Assess your costs every month and cut them where possible. “Set prices that enable your business to make as much profit as possible, while still remaining attractive to customers. In times like these, when your costs are likely to have risen, you probably need to increase your prices. If you don’t, it will eat into your profits and increase your cash-flow pressures.
“Try to get as favourable credit terms as possible from your suppliers, because the longer money stays in your business bank account the better. At the same time, don’t be too generous with the credit terms that you give to your customers. Aim to get paid in full as soon as possible. For higher-value sales and longer-term contracts, ask for part payments upfront or staged payments from your customers, because both are better for your cash flow.
“Send invoices to your customers as soon as possible, because you’re more likely to get paid sooner. Make sure all invoice details are correct, too, because mistakes can lead to unnecessary delays, which have cash flow implications. Shortly before an invoice is due for payment, send a polite reminder to the customer. If you’re not paid when due, send another polite but firm email. If there’s no response, phone them to politely request immediate payment. Good customers will understand, but some tact is required, because they could be waiting for payment from their customers. “Many businesses experience cash-flow problems from time to time, but persistent cash flow problems aren’t a good sign. You probably need to make some fundamental changes to get your business on a better financial footing.”