Cash Flow Management – The Four Essentials


Good cash flow management involves reviewing four main practices. We specialise in teaching you how to deal with the first in the list below, getting money in.

Cash Flow Management


The Four Cash Flow Management Essentials


  1. Processes for collecting money from customers.
  2. Seeking preferable payment terms with suppliers.
  3. Balancing money tied up in stock.
  4. Management of capital and expenditure (when and how big spending or investments should happen).

You should familiarise yourself with each. Not all of them will be in your control but there are steps you can take in relation to each. Failure to get to grips with your cash flow, can mean the failure of your business as a whole.

Contact us and we will send you our guide on practical steps you can take to improve your cash flow.


Cash Is King


Many high profile companies have gone out of business. Why? Usually because they ran out of cash. Some manage to rise from the ashes, whereas others disappeared permanently. Cash is king and without it, businesses do not survive.

Some people confuse profit with cash. Do not be one of them. Profit generally arrives from how well the business has performed over a period of time. For example, a business may have made £150,000 profit in the last year. However, the cash held by the business during that period may have been up and down, depending upon when money was received and when money was paid out.


Cash Flow Forecasts


Planning is crucial. Knowing when there will be highs and lows in cash in your business, is essential to survival. Failure to plan can lead to spending money at the wrong time which could result in your business running out of cash. You will then fall at the mercy of your suppliers as to what steps they take to recover money you owe them and whether you can source the supplies you need to continue to trade.

Cash flow forecasts needn’t be complicated or difficult. The more accurate and detailed the better but even a brief forecast is better than none at all. Ideally, you want to produce monthly / quarterly forecasts (short term), yearly forecasts (medium term) and several year forecasts (long term).

It is impossible to be entirely accurate and some speculation is needed when inserting the figures. Forecasting when customers will pay is particularly difficult as it is something out of your control. It is best to keep the figures used realistic. Overly optimistic figures will create an unrealistic view and likely lead to disappointment.

You should know when your regular payments fall due, such as rent, wages, etc. You should ensure you diarise when irregular payments fall due, so that you do not miss them, such as invoices for materials purchased.

Budgeting for payment of taxes is a major issue. HMRC is owed huge sums of monies from individuals and businesses, who fail to pay their taxes on time. HMRC often pulls no punches when it comes to pursuing taxes owed and regularly takes legal action against debtors, including insolvency proceedings. It is surprising how many businesses fail to budget for payment of taxes and then try to find the money out of the cash flow they have at the time the payment falls due.

Collecting Money From Customers >>>