5 WAYS TO IMPROVE YOUR COMPANY’S CASH FLOW
Running a business is undoubtedly an extremely rewarding experience – it allows you to set goals and create exciting financial opportunities, but it can also keep you awake at night, especially if cash flow starts to become an issue.
As an experienced, knowledgeable team of accountants and business advisers, working with SMEs across Greater Manchester, Your Tax Shop can understand most of the troubles you may face when running a business, and are here to pass this experience and knowledge onto you.
In this article, Your Tax Shop aim to discuss cash flow related issues and advise how to manage it better to avoid unnecessary stress.
So, what is cash flow?
Cash flow is the total amount of money going into and coming out of a business. Your business should have more money coming in to cover everything that needs to be paid out, at any one time. If the cash coming out is more than the cash going into the business, then you have what we call a ‘cash flow gap’ – most businesses address this gap by relying on overdrafts or savings to help them cover this gap.
The good news is, improving your cash flow is something that you can plan, control and work on, meaning you can avoid cash flow gaps and maintain a healthy business growth.
Introducing Your Tax Shop’s five most tried and trusted methods used to improve cash flow:
- 1. Always collect debts promptly
According to statistics, more than a third of SMEs wait two months beyond their agreed terms to be paid. To overcome this obstacle, it is crucial that you make sure your customers understand and agree to your payment terms before the work is carried out. As soon as you become aware of the late payers, following up with regular phone calls and reissuing the invoices in question will usually do the trick. If it becomes apparent that they are not forthcoming to settle the payment, it may be worthwhile to consider appointing a debt collection agency. Speed and consistency is the key to debt recovery!
- 2. Use an invoice template and accept a variety of payment methods
Although this may seem relatively simple, many SMEs fail to make the payment process easier for their customers. Invoices addressing to the wrong customer, having an incorrect address or invalid bank details are amongst the common issues. Having a standard invoice template may help to reduce these mishaps! For payments, bank transfer is the most common payment method. Opting to accept other forms of payment can help to cut down debt and maintain a healthy cash flow.
- 3. Create cash flow projections
It’s essential for a business to have an estimation of money they expect to flow in and out of their business. A cash flow forecast usually covers a 12 month period, however you can also design it to cover a shorter period. Your Tax Shop can also help with the preparation of this to give you a better understanding of your cash flow position.
- 4. Review your overheads regularly
A business’ overheads are expenses tat relate to the day-to-day running of your business, such as rent, insurance, salaries, utilities or advertising, to name a few. By listing your overheads down in your cash flow forecast, you will be able to see which areas you can cut down on or find cheaper alternatives.
- 5. Use reliable online accounting software
To stay on top of your finances and run various reports on your cash flow status, ditch the spreadsheets and opt for an easy to use Cloud-based accounting software. Your Tax Shop understand that accounting software is not a ‘one size fits all’, which is why we’re on hand to find the right software for you!
Your Tax Shop hope that the above points will help kick your cash flow into touch and enable you to start managing your cash flow better, using it to your advantages. If you would like to know more about cash flow, or any other tax and accounting matters, get in touch with us today on 0161 339 5689 or book an appointment to meet one of our friendly faces.