Effective cashflow management is crucial and quite necessary when it comes to the success of a small business and staying on top of what comes and goes is vital if your business is to grow. However, we know that there are many small business owners who lack the confidence required to really take control of their companies cashflow.
‘Cash is king’ and the state of the cashflow within any business dictates, for example, your negotiating and buying power, your ability to pay the bills and meet any short-term liabilities and potentially even the life-span of your business.
With so much resting on good cashflow management, here are some top tips for taking the reins and beginning to better manage your money:
- Know your breakeven point. It’s important for any business to know at exactly which point they will begin to be profitable – keeping that point in mind you can then seek to focus your efforts on managing your cashflow with a view to realising that goal.
- Don’t pay all your attention to profits. Your business may be profitable, which of course you should be proud of, but it’s essential that you don’t pay all your time and attention to this fact and forget about cashflow as a result. You should continue to manage your cashflow responsibly whichever stage your business is at, to ensure you don’t jeopardise the good progress that you have made.
- Ensure you have reserves. You may have some money squirrelled away for a rainy day at home, but have you done the same for your business? You never know what may be just around the corner and there are bound to be times when cash is a little tighter than others. If you have reserves, you eliminate the constant worry of how the slightest shortfall might impact upon your business and free up more time to focus on other important tasks.
- Spend sensibly. Regularly reviewing how you spend the money that’s coming into your business can be beneficial. Is there anywhere you can make significant savings? Perhaps you could take advantage of certain business transactions and identify instances where you may be able to barter for goods and services or even trade yours for another in return. On top of this, can you confidently say that everything you spend on is essential for your business to operate? If not, consider where you might cut costs by eliminating purchases that aren’t necessary, at least until you are comfortable with your profits.
- Pay and get paid. Where you can, get the best deal possible when it comes to extending your payables. Assess which payables are flexible and which should be a priority – try to spread your liabilities out to ensure you don’t end up paying for everything all at once. When it comes to getting your customers to pay on time understand their payment terms, plan accordingly and always issue invoices promptly.
- Up in the clouds. Make use of the technology and accounting software that is available to you. Cloud accounting packages such as Xero, Sage and Kashflow can make keeping track of your finances much easier.
- Prepare a plan. If you can, plan. Be clear on how you are going to keep track of what comes in and goes out, know which expenses are coming up and how you’re going to cover them and, if necessary, decide how you will allocate your money throughout the year, adapting as circumstances change.
Here at George Hay we can help you to take control of your cashflow and drive your business forward. We will work diligently with you to put a realistic plan together that will cultivate confidence within your business and ultimately facilitate growth. We also support a range of online accounting and bookkeeping software packages meaning we can take care of your cloud accounting needs. To find out more about what we can do for you and your business, call us today on 01767 315010.