The 10 tips to improving your cashflow
December 5, 2023
Cash and cashflow is the one thing that impacts directly on 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 ‘Start up’ 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’ success, but
- Cash is key to every business’ survival
The main areas for improving cashflow, generally fall into the following areas:
- Customer management – timing of invoices, payment terms, credit limits
- Control of costs and overheads – not letting costs rise faster than sales or carrying unnecessary overheads
- Supplier management – too many suppliers, agreeing to short payment terms.
- Planning for Payroll taxes, VAT and Corporation tax – retaining funds to pay taxes when falling due
- Management of business trading patterns – seasonal trading, large customer projects.
Our Key 10 Tips to Improve YOUR Cashflow
- Can you invoice your Customers SOONER than you are at present ? Can you part invoice in advance?
- Do you credit check your NEW Customers? Do you decide on your ‘credit limit(s)’ and ’payment terms’ based on the results of the credit check?
- Do you have a CLEAR Credit control process and are you applying them routinely in the business?
- Can you ‘SPEED UP’ the payments from your Customer and if so, what are the options for quicker payment i.e. ‘early payment’ discounts, use of Stripe, PayPal, GoCardless?
- Do you have Customers that are corporates, and who apply extended payment terms to you (90 or 120 days) i.e. can these be factored or financed in advance?
- Are there costs being incurred to deliver your service etc., that are NOT being recharged FULLY to customers?
- Are you doing work outside of your ‘SCOPE’ (contracted work), that is NOT (and SHOULD be) recharged to your Customers?
- Have you been paying your Suppliers early, and/or can you delay payments to the agreed ‘payment terms’?
- 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.
- Where your business is seasonal, has peaks or troughs or there are occasional LARGE projects, can you plan ahead for potentially obtaining a medium term loan or an overdraft
So what actions are you going to take to improve your business cashflow? Look through our cashflow services to see how Sakura can help your business.