With almost 1 in 4 UK SMEs citing cash flow challenges as a barriers to business growth, we felt it time to share our top 5 cash flow tips!*
Is your cash flow causing you a headache?
Are your business plans hindered by negative cash flow?
Are you being reactive rather than proactive when it comes to managing your cash flow?
If you answered yes to any of the questions above, you need to read on and discover 5 fabulous ways to get to grips with you cash flow!
Let’s start by understanding ‘cash flow’ and what it means to your business…
Successful cash flow is when your business maintains a positive balance between its incoming money and outgoing money. Cash flow is a movable feast and because of that it is essential you keep on top of it and remain aware of any transactions that will impact it. Take your eye off the ball and a positive cash flow position can soon become a negative one.
So, here are our 5 top tips to help you become the king or queen of your cash flow kingdom…
No 1
Xero, Xero, Xero… Simples! Without the right tools in place, cash flow management will be far more complicated than it needs to be. At Ellacott Morris we are a 100% digital only accountancy firm, and all our clients use Xero cloud accounting software, with our full support.
Xero accounting software provide real time cash flow data at the touch of a button helping you navigate cash flow hurdles before you trip over them.
Xero provides a range of plug-in Apps and features, including Futrli and Fathom, which enable you to evaluate your cash flow on a deeper level.
Xero will help you manage your outstanding bills, review your outstanding invoices, compare cash in versus cash out and allow for full integration with your chosen cash flow App/s.
We told you Xero would make cash flow simples!
No 2
We all hate late payers – right? Late payment has a hugely detrimental effect on your cash flow, so the easier you make it for your customers to settle up, the more chance you have of retaining that ‘positive’ cash flow position.
Use tools such as Xero’s online invoicing features and payment gateways such as PayPal or GoCardless to speed up your invoicing and payment process from start to finish. Or consider systems such as iZettle or Square for fast and efficient card payments.
By removing the barriers to payment you’re ensuring your customers can pay their bills at the touch of a button or tap of a card.
No 3
Be proactive not reactive… Here’s why…
The total value of outstanding late payments to SMEs reported in 2023 was £348 billion, a 48% increase from the end of 2022. The average value of outstanding late payments per SME in 2023 was £96,772, a 41% increase from £68,715. The average time SMEs waited for late payments in 2023 was 46 days, a 12 day increase from 34 days.**
This is not the time to sit back and see what happens. You must take control of your debtor tracking to retain healthy cash flow.
Xero offers an efficient ‘Ages Receivables’ report to clearly show which invoices are outstanding, making debt chasing a whole lot easier.
It’s also vital to make your credit control policy clear from the outset, stating your invoice terms, penalties for late payment and credit control processes. Cross your Ts and dot your Is by making all this information part of your proposals, policies and contracts.
An automated credit control function can ease the load too. Xero’s ‘Chaser’ is an integrated credit control App that sends automatic reminder emails to late paying customers.
Let Xero make light work of chasing bad debts.
No 4
Consider your financial modelling and how it impacts your cash flow…
By fully understanding things like operating costs, staff expenses, forecasted sales etc you’ll be in a much better position to remain in control of your cash flow position. Create a clear model of your financial processes and use this data as workable historic and forecasting tool for your cash flow management.
Reviewing and refining your overheads can also help you make cost savings that will positively impact your working capital.
Use your historical data and forecast your future cash positions to build an educated financial model for your business, then use this tool to help with decisions that could impact your cash flow.
No 5
Cash flow is complex – we get it! No – we really get it, so don’t hesitate to ask for professional advice and support when it comes to managing yours.
We work in close conjunction with all our clients, supporting them through the minefield of cash flow challenges, leading them to a happier, healthier position. We can assist you with adding cash-flow KPIs to your management accounts, review potential cost savings and efficiencies and assist with the bigger business decisions that may require a bit more number crunching.
Reach out to a member of our team and let us relieve that cash flow headache that’s been hanging around for far too long.
It’s time to learn how to unlock some financial stability and remove the cash flow hurdles that keep appearing in your pathway to success, and we’re here to help!
** https://www.google.com/search?client=firefox-b-d&q=2023+statistics+for+SME+late+payment+debt
