Healthy cash flow is a very important aspect of running a successful business. Too many business owners focus on profit rather than liquid cash, all too often resulting in an inability to pay suppliers and staff at the end of the month.
Southside Accountants in Wimbledon offer cash flow advice tailored to each client. For some initial help though, take a look at the tips below and see if you can improve the flow of cash through your business.
A formal credit policy. This includes:
- Checking the credit status of new customers and also existing ones wanting to increase their credit limit. You may think you know their financial status but things change quickly in business, and unless you check you won’t be aware of potential problems.
- Offering payment by direct debit, standing order, and credit card to give you more control and ease the collection process.
- Setting fair and realistic credit limits for each customer, and most importantly not allowing them to be exceeded unnecessarily.
- Including Terms of Trade on your website.
Monthly or quarterly accounts
You can keep an eye on cash flow only with access to current information. You can’t just rely on cash flow forecasts though – unusual or unexpected items sometimes go through, and you need to be able to react quickly if necessary.
Cash flow forecasts
These are vital to see how much cash will be needed in the coming months, and they perform a major role in keeping many businesses afloat. Forecasts can be prepared using a spreadsheet, or your bookkeeping software might include a cash flow template.
Southside Accountants in Wimbledon prepare cash flow forecasts for many clients. We can show you how to project your cash flow needs, or you can outsource this task to us.
Effective credit control procedures
Chasing payments isn’t a pleasant task, but you need to have a continuous in-flow of cash in order to survive. If you employ staff, a written policy that details the action to be taken at each stage will help keep the process on track, such as how customers are to be contacted and when.
You can always use debt recovery companies to collect payments on your behalf, but with a specific policy of your own to follow, this route should not be needed.