As everyone who’s ever started their own business can confirm, cash is king. Without a steady flow of capital into the business, your ability to expand – and even to stay afloat – is likely to be severely compromised. That’s why cash flow management and forecasting play such a vital role in maintaining the financial health of your business.

So here are our Top Tips for cash flow planning and making your money work for you:

  1. Profit Does Not Mean Good Cash Flow

It’s an old trope that Turnover is Vanity, Profit is Sanity & Cash is KING but, you can’t just look at your profit and loss statement and get a grip on your cash flow. Many other financial figures feed into factoring your cash flow, including accounts receivable, stock held, accounts payable, capital expenditure and tax.

Effective cash flow management requires a laser focus on each of these drivers, in addition to your profit or loss. Profit can be defined simply as revenue minus expenses.  However, a smart business owner will understand that whether you earned a profit is not the same as knowing what happened to your cash.

2. Know Your Break-Even Point

Before you can work towards a positive cash flow, you need to know how much you need to earn to simply break even. If you go over the break-even point, you’re doing something right. If you fall short of it (consistently), then there’s an issue that needs addressing.

3. Get invoicing right

When it comes to managing your cash flow, invoicing is the most important piece of the puzzle. Deliver your invoices promptly so that you can receive payment from your customers as quickly as possible. You should consider using automated invoicing to improve your turnaround times and reduce delays to sending invoices.

4. Ensure your books are kept up to date

You can also improve your cash flow by ensuring that your accounting information is updated on a regular basis. This way, you can gain a clear insight into the financial health of your company at a glance, giving you a better foundation from which to forecast future cash flow. It’s also essential to conduct regular bank reconciliations. Otherwise, you could end up thinking that there’s more money in your accounts than there really is.

5. Optimise your accounts receivable process

If you’ve extended credit to customers, it’s very important to make sure that your accounts receivable process is up to the task. There are a broad range of techniques you can use to boost your accounts receivable and get cash off your balance sheet and into your bank account. From offering positive (and negative) incentives to payers to making sure your credit policies are clear and concise, optimising accounts receivable can be an excellent way to ensure cash flow is managed correctly.

6. Liquidate cash that’s tied up in assets

From obsolete stock that can no longer be sold at its original market value to unused equipment even if you have to sell below the book value, any cash raised will contribute to a healthy cash flow. 

7. Build up a cash reserve

If you hit choppy waters with regard to your cash flow, access to capital can be all-important when it comes to the continued survival of your business. That’s why it’s important to build up a significant cash reserve that you can use to insulate your company from the vagaries of the business world.


Contact us and we can help you to set up Direct Debit collections, efficient Credit Control systems and we can also help you forecast your cash flow and identify any shortfalls in advance.