For the 5.7 million SMEs in the UK, cash flow is a constant focus. It’s the money coming in and out of businesses, and without proper management, it can lead to big issues.
To help you stay on top of your business’s money, we’ve put together the top 10 ways to manage cash flow successfully.
Organise your finances
Recent research from Xero has found 32% of SMEs are still manually writing down expenses and keeping paper receipts in bags. It’s worth making sure you have an efficient system in place and in 2019, it’s never been easier to organise your finances using digital platforms and apps, with many available for free.
Find online tools that store statements, invoices, and receipts electronically, and use digital book-keeping to easily view the amount of cash you’re spending and receiving each month. This is particularly important for SMEs who are switching to the Making Tax Digital service – you can find out more information about this in our legal whitepaper ‘Legal Hints and Tips for your Business’
Be an intuitive invoicer
Issuing invoices is key to having cash sent your way by customers and is one of the simplest ways to keep on top of your cash flow. Waiting weeks after a job is done to invoice, will mean even more time before payment is made, impacting your bottom line each month.
To avoid this, send invoices as soon as possible, and be sure to follow up if they aren’t paid on time – 48% of SMEs say late payments are one of the major factors putting their businesses at risk.
Invest in customer-friendly payment technology
Customer-facing businesses need to ensure the payment process is quick and easy to maximise cash flow. Contactless is beginning to overtake chip and pin for payments in the UK, and high street retailers can’t afford to ignore it. Find out more about the benefits of contactless card terminals here.
For online businesses, an easy-to-use checkout is crucial, with complicated payment being one of the main reasons customers abandon their baskets. As a business owner, find out how your e-commerce platform is performing, and research one-click payment options to ensure your customers stay happy online.
Keep targets in mind when monitoring cash flow
So, you’ve organised your finances, and all the facts and figures are available on demand. But now what? Preparing and updating a cash flow forecast will increase your concentration on cash flow, and – providing it is regularly updated – deliver accurate forecasts for the next six or 12 months of business.
Remember though, forecasting isn’t just based on your performance and predicted performance , but the market around you. You need to know your customer base and competition, inside out before you can accurately plan.
Setting targets, such as surpassing your breakeven point, will give you the motivation to achieve it. Again, there are great tools online which can be used to help you with forecasting, such as Sage. But if you’re new to forecasting, stick with programmes you know, such as Excel. The simpler the better!
Get creative with your sales
More sales mean more cash, so make sure you’re marketing your product effectively. For high street retailers, customers now demand a positive in-store experience, so find out what changes can be made to make them happy.
Promoting your brand on social media is also vital, and the more creative you are on your platforms, the more sales you could make. You can also now market through your social media channels, so make sure you’re linking back through to your sales pages.
Find the right business funding for you
Most businesses require funding but making sure you choose the right type, with the most suitable terms, can be a minefield. Do your research and make sure you find the right contract for you.
With 43% of SMEs struggling to secure the right loan solution from traditional banks, more businesses are choosing to use alternative finance. Find out how our Business Loans and Merchant Cash Advance work here.
Save money for a rainy day
Most businesses experience ups and downs, and when it comes to cash flow, there are always going to be quiet days. That’s why it’s important to have funds set aside for times when sales are low, and you need to dip into savings to ensure steady cash flow.
Set up a dedicated savings fund to assist cash flow and pay into it regularly, making quiet periods less difficult and a lot less stressful with cash ready to be utilised.
Keep communicating with your key partners
Talking about cash flow with those connected to your business, from employees to shareholders, will keep you in good stead with all parties. Many banks and financial services will offer exclusive benefits for small businesses, and regular updates ensure no shocks when your monthly statement goes through.
Establish contacts with your partners and develop a rapport with them so they understand your business and trust you to keep them informed.
Cut down on costs
Reducing monthly outgoings frees up cash for your business. Some costs will be necessary, but ask yourself if you can go without certain expenses, or look for cheaper alternatives.
Cuts could be made on subscription services or insurance policies you may not need anymore, and by looking for better deals on supplies.
Train your staff to monitor cash flow
As your business grows, you’ll find yourself with less time to keep an eye on cash flow and delegating it can come with benefits.
Once a trusted member of staff takes responsibility, cash flow can continue to be monitored closely whilst you look at the bigger picture and work on developing the business.
Got big plans for your small business? Find out how much funding you could raise in just 90-seconds with our eligibility check.