Maintaining good cash flow

Cash flow is the amount of money coming into and out of your business. Positive cash flow is when you have more coming in than leaving and negative cash flow is the opposite. Cash flow is your current position and it’s important to check you can cover your costs.

Monitor your cash flow – Keep an eye on your money. Cash flow constantly changes so prepare to adapt your approach where necessary.

Prepare a forecast – look ahead and think about what you are going to need for your business. Identify when to expect money in and when to pay out. Model your forecast and work out your worst-case scenario. Have you got enough?

Improve processes and chase up debtors – Do you need to tighten your payment terms? Good communication with your suppliers, customers, lenders, and investors is important. Set up payment plans with suppliers. Stay on top of invoicing. Maybe ask for deposits or part-payment prior to starting work on a large project.

Cut unnecessary costs – Reduce spending if you can. Examine your expenses to see if you can make cost-savings. Cut back on utilities or subscriptions, get the best deal on insurance policies, and renegotiate terms for loans or financial agreements. Don’t replace equipment unnecessarily and lease instead of buying. Don’t hold too much stock – only what you can sell. Generate cash by selling assets you don’t need.

Reduce tax payments on account – if you are expecting lower profits for the current year compared to the previous year, you should discuss this with your accountant who can then make a claim to reduce your payments on account to HMRC.

Otherwise, you could look at using HMRC’s ‘Time to pay’ arrangement to defer the payment of any imminent tax liabilities – PAYE, income tax, VAT, or corporation tax. The number to contact HMRC is 0300 200 3822.

For further advice, please contact me or your local Westcotts’ office.