Managing your cash flow to grow your business

Cash is king when it comes to the financial management of a growing company. The delay between the time you need to pay your suppliers and employees and the time you collect from your customers is often a problem. The solution is cash flow management. This means delaying outlays of cash while encouraging anyone who owes you money to pay it as fast as possible.  Our most profitable business owners prepare cash flow projections for the next year and often monthly. This allows them to see trouble spots before they happen and plan accordingly.

Improving cash receivable

Here are a few ideas to help you speed up cash collection:

·         Offer discounts to customers who pay their bills quickly;

·         Ask customers to make deposit payments at the time orders are taken;

·         Require credit checks on all new noncash customers; and

·         Issue invoices promptly and follow up immediately if payments are slow in coming

Managing your expenses

Here are a few ideas to help you manage your expenses:

·         Take full advantage of creditor payment terms. If a payment is due in 30 days, don’t pay it in 15 days;

·         Use your Bank funds transfer to make payments on the last day they are due;

·         Consider suppliers’ offers of discounts for earlier payments; and

·         Don’t always focus on the lowest price when choosing suppliers. Sometimes more flexible payment terms can improve your cash flow more than a cheaper price!

How do you prepare cash flow forecast

This is best done on a spread- sheet but you can do one on a blank piece of paper! Start by taking your bank balance at the beginning of a month and add projections of cash to be received from customers and other sources such as bank interest. Then deduct a projection of upcoming cash outlays. Have a line on your projection for every significant business expense.  Look closely at the closing balance you are predicting. Repeat this forward. Ask yourself “What’s the trend is it positive or do we need to start examining how we can increase cash collected and reduce cash expenditure?”

We can help

We have helped many businesses prepare forecasts and can offer sensible and realistic advice on managing your cash, please talk to us about how we can help! Contact us on 01753 892 815 or email info@hmiller.co.uk to find out more.