5 useful tips for business owners to improve your company’s cash flow

A woman at a desk using a calculator

As every good business owner knows, a healthy cash flow is the lifeblood of a company. Even if you have strong profits, you might struggle if you don’t have enough money on hand to cover your day-to-day outgoings.

In fact, even relatively minor problems with your cash flow could lead to serious problems down the line. For example, if you aren’t able to pay suppliers on time, it could damage your professional relationship and reputation.

If you want to avoid these problems, read on for five useful tips to help you improve your business’s cash flow.

1. Build an accurate report of your company’s finances

If you want to improve your business’s cash flow, one of the first things you should do is to put together an accurate report of your incomings and outgoings. Once you have this data, you can start to make effective changes to your company.

For example, it can enable you to more easily spot areas of your business which are ripe for expansion, so you can increase your revenue. Alternatively, you can use it to make cost-saving measures to reduce your outgoings.

Being able to make informed decisions about your company can enable you to make it more efficient and better prepared for the opportunities the future may hold.

2. Make sure you are paid on time

If you want to boost your company’s cash flow, it’s important to ensure that your clients are paying you in a timely manner. A good start can be to make sure you send out your invoices right away, which speeds up the process and helps to reduce the risk of something going wrong.

You could also consider automating this process, as doing so would not only save you time and energy but it can also give you peace of mind to know there won’t be any unnecessary delays.

Furthermore, it can also be useful to remind your clients when their invoices are due. You may want to send them an email a few days before the date to give them a gentle nudge, as well as a few days after if they forget.

3. Cut out any unnecessary expenses

If you want to improve your business’s cash position, it can be hugely useful to cut down any unnecessary costs. Occasionally reviewing your outgoings can help you to ensure your business is as efficient as possible.

While there will always be unavoidable overheads, such as wages or office rent, you can always find areas to save money. Of course, for some expenses, such as your broadband, it can also be important not to compromise on quality.

If you’re wanting to cut costs, a useful start can be to cancel any software subscriptions that doesn’t offer good value for money, or your team don’t use. In the same vein, if you want to reduce your outgoings for raw materials, you may want to consider comparing different providers.

4. Make sure there is good communication between your team

As with many challenges in a business, building a healthy cash flow is a task that can be made easier with proper communication among your team. Having all members be aware of when the regular invoices and expenditures are made can help your staff to plan around them.

For example, let’s say that in the first week of the month, your business has several major outgoings and few incomings, meaning that it is very cash poor. By making your staff aware of this situation, you can avoid them setting up further outgoings at a time when your finances are already stretched.

On top of this, if your incomings are lower or your outgoings higher in any particular month, clear communication with your team can help you to work out why, and remedy it.

5. Work with a financial planner

If you want to improve your business’s cash flow, one of the most useful steps you can take is to seek professional financial advice. Doing so can not only help you to run your company more effectively but also give you greater peace of mind.

When you work with a planner, they can help you with a range of issues, such as how to extract profits from your business tax-efficiently, and how best to structure your pension contributions and protection arrangements.

A planner can also give you valuable advice as to how much your business should hold in cash as reserves and how much to invest for the future. Knowing that you’re working with an expert can be a huge weight off your mind, enabling you to focus on growing your company.

Get in touch

If you want to build a healthy cash flow in your business, we can help. Email or call us on 01454 416653.

Please note:

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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