Cash FlowIt’s a new year and one key area to look at is your business cashflow. Keeping track of your finances is something we should do all year round, not just at Christmas.  Although surprises are appreciated most of the time, when it come to a shortfall in cash, its one surprise your Bank Manager doesn’t want. Identifying potential cash flow problems early, before they happen, is crucial to any successful business.

At this time of year it’s easy to get into cash flow difficulties having had time off over the holiday period and delaying issuing invoices for a week or two.  Even more likely, the accounts department at one of your customers has been closed over Christmas and that all important payment still hasn’t been paid to you.  Here are 5 simple pointers to help you through a cold snap:

  1. Have a Cash Flow Forecast

Keeping track of money coming in and out of your business is essential. You may have a profitable business, with good margins and predictable costs, but profit isn’t the same as cash flow. If the cash isn’t flowing, or is tied up in stock, suppliers and staff can’t be paid which is bad for business. Set a 6-12 month target to keep track of those peaks and troughs in cash flow.  If 6 months is too much of a task, try the next 90 days to start with.  List all your known costs and fixed and variable costs that must be paid, building in any seasonal variances.  Match this with expected income, however, be realistic –  if your customer pays on terms be careful to build this into the cash flow.

Keeping on top of your cash means you will be able to deal with problems more quickly.

  1. Review those payments

Just like your personal account, regularly reviewing your payments going out of the business account is important. We all have things going out of our accounts that are no longer appropriate which should have been cancelled a long time ago. Assess how you pay your suppliers, utilities etc. can they be changed to monthly payments to smooth out any peak demands on your cash?   Can you receive a discount if paid early?  If you could review your costs and reduce them by 10%, what difference would this make to your cash flow, never mind your bottom line! It’s worth taking the time out to ask the question:  are you really getting the best deal on your stationary, lease agreements and utilities?

When was the last time your reviewed your supplies or asked for better terms?

  1. Improve collection

You may have done the job, provided the service or delivered the goods, but until the money is in the bank your job is not complete. Sending out your invoices promptly and chasing non-payment quickly will improve cash flow.   Clearly set out your terms of payment, if you want payment in 30 days, state it! Knowing when payments are due from customers will help you keep on top of your cash flow. Knowing your customer payment dates will highlight slow payers.  Don’t ignore the irregularities or delays, this may be an early warning sign that your customer is having difficulties with their own cash flow.    If you have concerns, speak to the customer promptly and set a limit to the amount of credit you are prepared to extend to them.  Remember if the customer goes bust, non-payment of your bill could be a bad debt straight off your bottom line.  This could represent a lot of widgets to sell, or hours of service, needed to replace the loss.

  1. Stay on top of Stock

Unsold stock is simply cash in the storeroom instead of your bank account. Effective stock controls are as important as managing your cash flow. Regularly reviewing your stock levels as frequently as your cash is a good idea.  Helping you identify the items that are not being sold and those that require re-ordering.  Offer customers incentives to buy old stock and replace with fast turning items. An effective stock control system will have a positive impact on your cash flow and ensure you never have too much stock and your cash is sat in the right place!

  1. Cash is King

The old saying “Cash is King” is still appropriate today as always because without it, the wheels of business can stop turning.   However, it doesn’t always have to be your cash, access to finance could be the answer. Many businesses will need extra finance at some point from a bank or lender, such as an overdraft or short term loan, but these options are not the only way to boost those cash reserves. The bank is not the only option for short term funding and for many businesses not an option at all. The good news is there are a variety of new ways in which businesses can boost their cash, such as single invoice discounting, merchant cash advance or refinance of existing assets.

If you have identified late payers or a pinch point in your cash flow, don’t ignore it and hope for the best, act promptly and seek advice.  At Pinpoint Finance, we can help you with seeking alternative ways to fund your cash flow requirements. We have the experience and expertise to fully assess your needs and will take time to understand your business. We will guide you through the whole process, manage your application through to completion, leaving you to do what you do best…manage your business!

Call us today on 01904 866 100 to arrange a free business finance consultation or visit us on