Managing your cashflow

Last updated: 7 July 2017

Identifying cashflow problems

Try to anticipate cashflow problems before they happen:

  • plan ahead using cashflow forecasts
  • arrange alternative sources of finance
  • monitor market conditions
  • keep an eye out for signs of customers or suppliers in trouble
  • take action as soon as you see a problem

Cashflow problems caused by external factors

The factors that affect your cashflow are sometimes beyond your control. You must still understand and take account of them.

Examples might include:

  • customers or suppliers going out of business
  • consumers having less money to spend
  • VAT, inflation or interest rate changes
  • changes to market conditions, caused, for example, by new competitors
  • availability of loan finance and overdrafts
  • new legislation in your sector
  • government fiscal policy

The risk of non-payment

Try to spot the warning signs of non-payment (such as evasive behaviour or excessive invoice queries). Have a contingency plan in place. Use a credit agency to credit-check new customers.

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What to do if you have a cashflow problem

It's important to act immediately. You may be able to find a solution internally, eg by revising business practices, cutting costs or taking on more orders.

You could seek specialist advice (from your accountant, investor or a business mentor). It helps to have a good relationship with your bank and other lenders. Be sure to:

  • share your cashflow and other business forecasts with them
  • break bad news promptly
  • explain what you're doing to solve the problem
  • not make unrealistic promises

Short-term finance

You could consider:

  • non-bank lenders
  • financing from family and friends

Find other ways to fund your business.

Don't use loan sharks or unregulated loan providers. Only deal with banks or building societies that are regulated by the Financial Conduct Authority (FCA). You should always:

  • obtain several written quotes for comparison
  • get your accountant's advice
  • check if your bank can offer better terms
Managing your cashflow
Identifying cashflow problems