Guide

Managing your cashflow

Last updated: 7 July 2017

Find ways to improve your cashflow

To improve your cashflow, you need to understand how cash moves through your business. You need to keep accurate, up-to-date records and organised accounts, including cashflow forecasts. You should also:

  • invoice accurately and promptly
  • bank payments immediately
  • arrange a payment schedule so that your bills aren't all due at once

Keep records of customer payments to help you work out who pays bills on time. Use this to work out the risk of extending credit to each customer. Consider credit checks on new customers.

Evaluate your payment terms

Review your payment terms for suppliers and customers. What's the gap between the money you pay out and the money paid in?:

  • try to negotiate a better deal with suppliers
  • check if your suppliers offer discounts for quicker payment and consider offering a similar incentive to your customers
  • ensure that payment terms and conditions are clear

Pay and get paid on time

Credit control and debt recovery are important factors in good cashflow management:

  • try to pay promptly - suppliers are more likely to negotiate deals with reliable customers
  • issue reminders as soon as a payment is late and then chase up
  • consider charging penalty interest for late payment
  • plan how to deal with non-payment
  • go to the sheriff court as a last resort – it's a complex process and you may not get your money and you might damage your customer relationships

Improve your asset management

Examine the effects of asset management (how you handle your resources to get the greatest benefit from them) on your cashflow:

  • don't spend on areas that are not business-critical
  • look at ways of spreading payments on assets, or lease rather than buy
  • control your stock levels and avoid overstocking

Financial arrangements

Think about how your financial arrangements could improve your cashflow:

  • consider debt factoring and invoice discounting
  • use overdrafts rather than loans for short-term requirements
  • if you are registered for VAT, buy major items at the end of a VAT period (you can offset the VAT on the purchase against the VAT you charge on sales)
Managing your cashflow
Find ways to improve your cashflow