How to improve your business cashflow


December 5, 2023

As an SME business owner, you will no doubt have had occasional sleepless nights over… well not to worry, keep reading for our cashflow advice.

Whether waiting on the payment of an invoice from a Customer ahead of your upcoming payroll struggles with meeting your VAT return payment by the deadline date, or even paying your salary on time to meet your mortgage!

The ‘holy grail’ is obviously to continuously and consistently grow your business, which usually means a focus on customers, invoicing and turnover, however, ultimately you will know that above all else CASH IS KING!

Cash and cashflow are the one thing that impacts directly the success of your business i.e. you need to ensure that you can pay your staff, pay your suppliers, pay HMRC and also pay yourself.

It is also important to note that the one in five ‘Startup’ businesses that did NOT make it to Year 5, gave the reason for failure as being cashflow issues-in other words a lack of CASH!

Profitability is key to any business’s success CASH is key to every business’s survival

Sometimes discussions around managing, or better still improving, a business’ cashflow can be about reports and forecasting, but frankly it is generally a variety of simple and practical steps that will make the biggest IMPACT on your cash and cashflow.

My own experience is that it is not one thing that will improve cashflow e.g. credit control, using Stripe etc, but a combination of the ‘right’ things being done regularly and consistently each week and each month!

The key steps around cashflow, and therefore the areas for improving cashflow, generally fall into the following areas

  • Customer management – timing of invoices, payment terms, credit limits
  • Management of costs and overheads – marketing and staff costs rising faster than sales, or unnecessary overheads
  • Supplier management – too many suppliers, agreeing to short payment terms
  • Management of business trading patterns – seasonal trading, large customer projects

Answer these 11 questions and start improving YOUR business Cashflow:

  1. Are you invoicing your Customers SOONER than you are at present?
  2. Can you make CHANGES to your Payment Terms or apply different terms to different Customers?
  3. Do you have a CLEAR Credit control process and are you applying it routinely in the business?
  4. Can you ‘speed up’ the payments from your Customer and if so, what are the options for quicker payment i.e. Stripe, PayPal, GoCardless?
  5. Are you CHARGING your Customers properly (and consistently) for your time/service?
  6. Are there costs being incurred to deliver your service etc., that are not being recharged FULLY to customers?
  7. Are you doing work outside of your scope (contracted work), that is NOT currently being charged to your Customers?
  8. Have you been paying your Suppliers early, and/or can you delay payments to the agreed payment terms?
  9. Are there costs that are now unnecessary still being charged in your business (that can be reduced or cancelled) e.g. direct debits, user numbers on subscriptions etc.
  10. Where your business is seasonal or has peaks or troughs, is obtaining an overdraft a useful cashflow ‘tool’?
  11. Do you have Customers that are corporates but with extended payment terms i.e. can these be factored or funded in advance?

So what action are you going to take NOW to improve your business cashflow?

Get in contact with our team to discuss this more.