Cash flow: the life blood of business
Cash flow: “Never take your eyes off the cash flow because it’s the life blood of business” – Richard Branson
Whilst managing and monitoring the balance sheet of your business is important, monitoring your cash flow should always be your first priority. As we come into the ‘silly season’ it will be crucial to have your finger on the pulse of your business’ cash flow, as the Christmas period can impact cash flow in a number of ways: increased employee expenses (leave loading, public holiday rates), customers’ priorities shifting and consumer spending changing.
Below are some tips to help ensure that your cash flow stays strong and well managed:
- Debtors: Have careful control of the customers who owe your business money. Keep to your normal trading terms and resist the temptation to give leeway too often, as even the most trusted customers can begin to slow with their payments if allowed, which can have a significant impact on your cash flow.
- Finance: Monitor interest rates carefully: while we are currently experiencing historical lows, it is inevitable that they will begin to rise again at some point in the future. Growth is encouraged by low interest rates but it is important to ensure that your business is not depending on low interest rates in the long term. As interest rates rise, cash flow pressure will increase.
- Creditors: Where possible, look for opportunities to finance your needs with interest-free loans from suppliers, even if it is only 30-60 days. This can make a measurable difference to the total liability you owe.
- Stock Levels: Resist the temptation to purchase an over-supply of stock, despite these low interest rates. Too much stock can put a strain on cash resources, as it could take time to sell and bills still need to be paid. Be realistic when it comes to sales forecasts and buy stock for likely While accepting discounts for bulk deals is tempting and can save you money over a longer period, it will also require you to outlay more now – which can be another pressure on your cash levels.
Cash flow, debtor management and stock control are all critical aspects of business management and it is important that every business have practices in place to ensure a stable cash flow, regardless of economic conditions.
If you have any questions regarding Cash Flow, please do not hesitate to contact our team on 07 4151 8898.
Amanda Wolff | Bookkeeper | The Money Edge