Is your business cashflow keeping you awake at night?

Is your business cashflow keeping you awake at night?

How is your cashflow? Are you experiencing difficulties with cash flow?  Is it keeping you awake at night?

6 out of 10 business owners are losing sleep over problems with cashflow, according to the BACS payment scheme.  Research shows that 84% of small companies report late payments, while around 33% say at least one in four payments arrive late.

You may be familiar with the phrase “sales are vanity, profit is sanity” but it may be time for you to consider “cashflow is reality!”  Look at some of the helpful pointers below to help strengthen your cashflow position.

New Customers

When winning new customers, you need to make sure that your contract and terms are clearly set out, detailing the obligations between you and your debtor (customer).  This will set the expectations from the beginning of your business relationship, about when you expect to be paid and hopefully avoid unnecessary conflict at a later date.

Credit Limits

Due diligence is important before extending credit terms for new customers.  If you don’t know the financial strength of your potential customer, you need to do some research before offering this facility, as bad debts can quickly place a business under pressure. 

There are online services that are available, which allow you to view commercial credit reports.  These will help you to assess the credit and cash flow risk to your business and suggest a credit limit.  Some of these are available free of charge and some may levy a subscription charge. 

You may opt to give your new customer a lower credit limit to begin with and raise the limit once they build up some reliable trading history with you.

Prompt Invoicing

It may seem obvious, but be sure you invoice on time.

Keeping Track of Payments

Have a system in place to keep track of invoice payments on a regular basis, as checking only once a month for example is too late. There are a number of affordable online software solutions that can help you with this.

Online accounting software will allow you create customised invoices and issue statements of account to follow up late payers.  The software also allows the bank to feed directly into the system, making easy allocation of payments to customer invoices and also reconciling payments to your suppliers.

If you prefer not to use accounting software, you can still track payments by checking your bank online or set up an alert in your bank account to notify you when an important payment comes in.  Some banks now offer this option online or as part of their mobile banking app.

Image of a wallet clamped shut due to cashflow problems
Cashflow problems are the quickest way for your business to fail!

Cashflow Forecasting

Many small businesses use excel spreadsheets, when properly set up can provide a very useful insight to your future cash position.  Cashflow forecasting allows you to see when you are expecting money in and when money is spent paying suppliers or other expenses giving you information at a glance on your cash position and when the business may encounter a squeeze.  With this information to hand you may wish, for example to negotiate with key suppliers or customers.

If you are experiencing any of the above issues, then MMT are able to help.  Just go to the contact page to get in touch.