How to resolve your cash flow problems

The easiest way to ensure you are on top of your cash incomings and outgoings is to look at your cash flow forecast a few times a week.  That way you will begin to understand how your customers are paying you and spot any difficulties or bottlenecks before they become a problem.

Many businesses use a spreadsheet to monitor cash which is fine albeit it is time consuming and there is room for errors. Nowadays if you are using cloud technology, Apps such as Fluidly are a huge help because they automate the process. Fluidly connects to your cloud accounting software such as QuickBooks or Xero which means that the data is always up to date. QuickBooks has its own version but only forecasts for 3 months.

It is ideal to have at least a 12-month forecast which will allow for annual outgoings such as insurance, corporation tax etc. to be taken into consideration.

Why is it important to have a cash-flow forecast?

As you may be aware a cash-flow statement / forecast is different from your profit and loss account. It looks at money flowing in and money flowing out over a given period.  It indicates whether a business will be able to meets its liabilities as they fall due and thereby ensures business continuity.

Regularly reviewing your cash also assists you in planning for the future, such as looking at finance to fill the gaps in cash shortage and maybe when there is surplus cash, looking at how best to use this to receive maximum rewards and even plan for growth.

Lack of cash flow planning is still the main reason why most businesses fail.

Benefits of a cash-flow forecast.

There are numerous benefits that can be gained when you have good control over your cash. The most important is that it allows you to plan ahead.  For many small businesses, their bank is always looking at the cash position especially when they are facilitating finance such as overdrafts and loans. Consistent late payments of bills can lead to a deteriorating situation quite quickly and could lead to difficulties in the business. Therefore, speaking to your accountant and bank ahead of anticipated gaps is a good idea, especially if you have a plan as to how you are going to address these gaps.  If you do not have a plan your accountant will be able to help you here.

Another benefit is using the modelling or “what-if” scenarios. This is a great tool to help you understand how different business decisions or options will affect your overall cash position.  If you have not done this before then talk to us because it will be important as we move into the post pandemic era.

7 Steps to maintain a healthy cashflow.

Having a cashflow forecast that reflects the reality of your cash position is a good starting point but what should you do to ensure you have a healthy cash-flow?  Here we share some tips that are easy to follow.

  • Give detailed invoices.

It is important that you give as much description as possible on the actual invoice when it is raised.  This means there is less time wastage with queries and amendments.  You should also give your bank account details on the invoice, so it is readily available for payment.

  • Make it easier for your customers to pay you.

If you are using a cloud accounting software, then you can connect to an App called Go Cardless. For a relatively small monthly fee the App will collect the money on your behalf once it is set up.  On average 10%-15% of all credit or debit card payment fail as cards get stolen and it takes time and effort to rectify these non-payments.  With the direct debit option offered by Go Cardless you will minimise this risk plus save time on unpaid debts.

Offering customers multiple payment options have also been known to speed up payment so have a look at setting up a credit card facility if you do not want to go down the direct debit route.

  • Chase your money in quickly

When cash is tight and even when it is not, many businesses do not make payments without reminders.  It is therefore important that any outstanding debts are chased regularly.

A favourite App of ours is Chaser which connects to your cloud accounting software.  With Chaser you can schedule a sequence of reminders and because it connects to your accounting software, and assuming your bank is also connected, then the App does the work for you.  You can set up as many reminders as you like starting from just before the due date to X days after the due date. The whole process is automated but you need to make sure your bookkeeping is up to date.

  • Get extra help quickly.

When debts build up it is very difficult to keep on top of them so doing a regular debtor review will help because it will help you understand the customer behaviour. Chaser can also generate reports which will give you better insights so, if necessary, you can devote some resource into say speaking on the telephone to your customers who are regular bad payers.  Never let the debt build up.

  • Keep on top of your payments.

If cash flow is tight, you should consider going back to your supplier and seeing if you can negotiate a longer term.  Simply not paying your creditors could lead to more difficulties.  If you are relying on key suppliers than it is important that you do not scar those relationships.

  • Stay focused on your stock management.

Poor inventory management could easily lead to bad cash flow management.  Problems such as over ordering stock which can lead to obsolete stock, and it means your cash is being tied up in stock which is now devalued.  Bad stock management can also lead to under ordering which could lead to customer orders not being fulfilled and creating negative goodwill whereby they will possibly now take longer to pay you. Again, if this is a problem area you should consider using an inventory software and there are a few on the market depending on your industry.

  •  Have access to finance.

From time to time many businesses can need extra cash and so you should have some back up plan which is not necessarily your bank.  We do work with a few providers and during lockdown we have helped a few clients with access to the government backed loans. It does not necessarily have to be term loans, you can have invoice finance, asset finance or even invoice factoring.

In this blog we have drawn your attention to a few tips and tools you can use to ensure you have a healthy cash flow.  You may want to look at some of these in a bit more detail such as the Apps we have mentioned.  If so, please get in in touch with your client manager in the first instance.  If you are not working with us and would like to explore these further, please contact Priya on 01923 224411 or at