It may sound straightforward, but balancing invoices and payments with your business spending can be challenging for any business owner. It’s really important to apply a positive mindset from the start and have a cash flow management strategy that will boost growth.
We asked Jason Miller from our partner, Ikara Business Solutions, for his advice on some of the issues that can affect your business cash flow.
Cash flow can be a real headache for small business owners, in a report by Intuit Quickbooks, 69% of owners admitted they have been kept awake at night worrying over cash flow. Luckily, you can avoid the sleepless nights and get a clear understanding of your finances with these simple tips to improve your business cash flow.
Seek professional advice
As a business owner, spare time is a luxury for you. We can reassure you that you are not alone. If you are not a whizz with numbers or simply do not have the time to spend on your business finances, this is where the experts can help. The biggest point to remember when managing your cash flow is to keep things simple. We make sure our clients have the key financial data they need. We help them take control of their cash flow by helping them understand the cash flow statement and what it means for their business. Having these figures at your fingertips can give you a really clear picture of where your business is and how well it is performing. Depending on the nature of your business, we offer bespoke solutions that ensure complete accuracy is maintained using technology to gather financial and non-financial information. Clear data visibility allows you to make faster, better decisions, giving you the confidence to grow your business.
Don’t mix work and play
Trying to organise receipts, income and expenses into personal and business once they are mixed is a time-consuming challenge. It also makes it unclear how well your business is performing. Keeping your personal and professional finances separate means you can easily track your business cash flow. Dynamic accounting software can really help you keep this organised. We use Xero with connected apps such as Receipt Bank to seamlessly manage our clients’ growing pile of receipts online.
Build a cash buffer
Your business will have slow periods. This can be down to a range of factors, such as seasonal variations, but is natural in all business. Looking ahead and planning for the future will help your business stay one step ahead. During these times, having money set aside in the bank account makes it easier to survive these cash shortfalls.
Speed up cash inflows
If your business experiences cash flow problems, many would assume you’re having poor sales. However, a cash flow problem means the cash is coming, but there is a bottleneck in your accounts process that means the cash hasn’t actually arrived yet. One of the best ways to speed up your cash flow is to make sure you are getting paid on time. Make it standard practice to keep your invoices in order, format them correctly and send them out immediately. Also, many businesses can make the mistake of not following up on unpaid invoices. Consider offering an incentive for early payments and don’t be afraid to take formal action for any late payments.
Detailed budget management allows you to react quickly to potential problems. We offer our clients lots of options for creating an extensive budget for their business, so they can easily see where they are spending their cash in the coming months. Having a cash flow budget forces you to think about what you plan to spend your money on. We also advise our clients on the best plan for their cash flow management practices.
Managing cash flow is an important aspect of any business. But for a small business, it is absolutely critical. Good accounting software and advice are vital for small business owners.
Our five simple tips are a good starting point to get on top of your cash flow. A basic cash flow forecast will help you identify where your business needs support. Don’t push your financing responsibilities to the bottom of your to-do list, we’re here to help.
Ikara Business Solutions is part of EKW Group, for more information on the services we offer, visit www.ekwgroup.co.uk