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October 19, 2015

10 ways to improve your cash flow and boost finances

how-to-improve-your-cash-flowCash flow is vital for business survival. We’ve all heard that old adage ‘cash is king’ but it is still relevant today. Without a steady cash flow, your business will run into serious trouble. You won’t be able to pay bills or staff, make purchases or plan for the future.

Here are 10 ways to improve your cash flow and stay on top of your finances:

1. Forecast cash flow – It may sound obvious, but it’s surprising how many businesses don’t maintain an accurate cash flow forecast. Look at how much cash is coming into your business each month (cash inflow) and how much is going out (cash outflow). Identify seasonal peaks and troughs and plan business activities to ensure there is always cash to make payments.

2. Mind the gap – Practice good cash flow management.  Gaps appear when there is more money going out the door than coming in, leaving your business short. Spot the gaps before they become gaping holes by taking proactive action e.g. chase overdue invoices; negotiate new payment terms with suppliers, etc.

3. Speed up cash conversion – The sooner you collect cash, the quicker you can use it to increase profits, pay wages or debts. Tips for speedier cash conversion include: send out invoices immediately after delivery of goods or services; change your payment terms from 60 days to 30 days and consider offering a discount to customers paying their bills early.

4. Make it easier for customers to pay – Fed up waiting for business cheques to clear? Reduce delays by encouraging customers to make online payments.

5. Create a collections process – Stay on top of overdue payments. Many companies operate a system of reminders that become gradually more serious and formal as invoices become more overdue.

6. Offer credit cautiously –According to Dun and Bradstreet, more than 90% of companies grant credit without checking references. Failing to do your homework and checking references puts your business at risk, saddling you with non-paying customers and racking up bad debt.

7. Keep an eye on cash flow continuously – It has been said ‘look after the pennies and the pounds will look after themselves’. If you don’t have a finance manager, consider training an employee to monitor cash flow on a daily basis to ensure there is always sufficient cash in the bank.

8. Plan for any cash shortfalls – Have a strategy in place to meet cash flow bottlenecks head on. A good, old-fashioned bank overdraft facility may help to tide you over or a short-term loan. Don’t be afraid to shop around for the best deals and keep your bank informed over any big changes to your cash flow forecast.

9. Consult an expert – Working with a specialist bookkeeper can be a valuable investment – providing insight into areas you may have overlooked. At Inspira, we can help you with you with your cash flow forecasting to anticipate and plan for cash flow problems.

10. Control business expenses – Look at ways to save money on expenses to improve your bottom line. If you don’t already, start tracking business expenses to stay on top of outgoings.

For more free help and advice about managing your business finances, sign up to the Inspira monthly newsletter today.

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