This month, we’re recapping our twelve-part series on cash flow management for small business owners and entrepreneurs, and sharing one final piece of advice.
If you missed any of our previous posts in this series, you can read them here:
- Part One: Cash Flow Basics
- Part Two: Failure to Plan is Planning to Fail
- Part Three: Those Who Shout Loudest Get Paid First
- Part Four: Must Have or Lust Have
- Part Five: Working Capital – Make it Work for You
- Part Six: Shelter Your Assets
- Part Seven: You’ve Got to Innovate to Accumulate
- Part Eight: Treat Your Suppliers Like a Bank
- Part Nine: Take Stock of the Situation
- Part Ten: Balance the Bank
- Part Eleven: Price to Sell
- Part Twelve: Plan Your Escape Route
Recap: Cash is King
A business can’t run if it doesn’t make money; that’s the bottom line. Meaning cash flow should be the biggest concern for every business owner.
Even if your business has always had a healthy amount of money flowing in and out, you depend on your customers to pay their invoices on time, and one big client going into liquidation or simply struggling with their own cash flow one month could have a significant effect on your ability to meet payroll requirements or pay your suppliers.
Late payment is the single biggest obstacle faced by small business owners, with IPSE estimating that around £16.5 billion is missed out on by UK SMEs every year in lost income and missed opportunities. A good credit control process is essential; set your payment terms shorter than necessary, and always start the collection process immediately.
A subscription-based business model could be the answer to your cash flow problems, as it will provide you with regular monthly income, smoothing any bumps in your cash flow and allowing you to plan ahead. You could also consider incorporating your business in order to access the benefits available to limited companies.
Negotiate discounts from your suppliers, reduce the amount of stock you keep on hand and implement a strict stock control process to help minimise costs. Treat your suppliers like a bank when necessary and delay payment, but don’t risk the relationship or cause your suppliers to struggle with their own cash flow.
Invest in new technology and stay competitive. Innovation doesn’t always mean IT; up to date processes and procedures can be innovative too. If you can’t afford to adopt new software or methods right now, speak to your employees and find out if the current, traditional methods are still working—if it’s not broken and you can’t afford to fix it, don’t!
Maintain a good relationship with your bank manager and they’ll be more likely to help you out in your hour of need. Make your working capital work for you; consider your options when borrowing money.
When you need to boost your bottom line, increasing sales isn’t your only option; raising your prices is another good way to bring in more cash. It may sound counter-intuitive, and you will lose some price-sensitive customers, but if you strike a balance between the price increase and the lost clients, you’ll increase your profits with ease.
Make sure you have a strong exit strategy for when the time comes for you and the company to part ways. Buyers like to see a healthy bank balance, so the first step should be to sell any assets the business can manage without, and make sure any and all debts are paid.
Or, alternatively, consider a merger with a well-chosen competitor. It could give the company the cash injection it needs to continue, as well as bringing in new blood and fresh ideas that will invigorate the business.
Hive Off Assets
Keep a Balance with Your Bank
Invest in Technology
Never Spend More Than Necessary
I hope you’ve found this cash flow management series interesting and insightful, if you have any queries or would like to discuss anything you’ve read in these thirteen articles in more detail, please don’t hesitate to get in touch.
Want to read the complete guide? Click here to get Happiness is a Positive Cash Flow and read all our tips and advice for achieving and maintaining a positive cash flow.
Our next series will look at the reasons why HMRC takes an interest in some businesses, and how you can stay off the radar and avoid a tax investigation. With recommendations for structuring your business, as well as tips for saving money on your tax bill, this nine-part series will help you to keep your tax affairs in tiptop condition, so the taxman is never tempted to take a closer look. Don’t want to wait? Click here to get our guide, Happiness is Paying the Correct Tax now.
Get in touch to discuss your individual circumstances and get some independent, impartial advice on your business’s financial health.