10 tips for cashflow management to keep your business out of trouble

If a business doesn’t keep an eye on its cashflow, it could end up closing. A business can be very profitable but without cash to pay expenses, payroll and stock it cannot operate effectively to meet its orders and provide its services.

1. Know your breakeven point

For example , if you are in the restaurant business then you should know how many covers you need to break even or if you are a hairdresser you should know how many clients a week would be needed.

2. Cash is king, not how much profit you are making

If cashflow is becoming a problem then you should start looking at income and expenses in more detail. Could you get more money upfront, do you need to raise your prices or do you need to cut expenses

3. Build and maintain cash reserves

It is ideal to have three to six months reserves in a business.

These reserves can help you in the event of a temporary market downturn.

4. Use a cash flow worksheet

A cash flow spreadsheet will help you keep tabs on your general cash flow management. With a spreadsheet, you can track your monthly expenses and cash income, and make net cash flow predictions. We can help you set this up or do it for you. A forecast should include income, expenses, taxes and loan repayments.

5. Collect monies on outstanding invoices ASAP

Monitor payments received and which invoices are outstanding. Set up a credit control process, where you send reminders and phone clients to make sure monies come in. Designate this task to someone in your company or outsource it.

6. Give incentives for early payment

Consider giving customers discount for paying faster or encouraging return custom. Don’t give credit to slow paying customers, make them pay up front.

7. Extend creditor terms

See if you can extend your credit terms with suppliers. This will increase your debt, but it will also increase your cash reserves. However, make sure you then pay them on time otherwise they can withhold supplies and impose penalties. Maintain good relationships with suppliers.

8. Boost sales with creative incentives

Look for creative ways to increase sales like hosting an event or offering a referral scheme.

9. Designate a cash flow monitor

Get an accountant who offers cashflow management services or designate this to a trusted employee who understands finances.

10. Use technology to your advantage

Accounting software have aged debtors reports or putting your cashflow spreadsheet in the cloud so that it can be accessed anywhere would also be advantageous.


If your cash flow stays positive, your business can survive bad times. Use a cashflow forecast broken into months, to keep your net cash flow upto date, and stay vigilant.

A solid cashflow management process will stop you having sleepless nights and give you peace of mind. In no time at all you’ll stop haemorrhaging cash, know your cash flow is in check and you’ve got backup cash reserves to help you through any major downturns.

*If you would like a cashflow forecast created for you or help monitoring your cashflow get in touch on info@sjbakeraccounting.co.uk

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