How a small business can get on top of cash flow

  • 10 Sep 2018

By Caroline Plumb, founder of Fluidly

Cash flow is a major pain-point for small businesses; around 80-90 per cent of failures in the sector are due to poor cash flow, and managing this is the single biggest task that finance teams in SMEs spend their time on. 

All businesses want to have control, certainty and confidence around cash flow. It’s especially key for small businesses and start-ups, where having a grip on the cash coming in, the cash going out and everything in between can be the difference between success and failure. If you clearly understand your current and future financial position, you can make the right financial and strategic decisions for the business.


The following top tips will help you improve cash flow and boost your bank balance:

Set clear expectations

The easier you can make the process for your customers to pay, the better. This means providing clear documentation about payment timelines, options and amounts. For bigger jobs, try to negotiate some payment upfront or in stages so you have money in the door faster. Make sure you talk about how you’ll be paid upfront while you still have negotiating power and get all the details: do you need a purchase order, who should the invoice go to etc?

Always invoice promptly, as soon as work is complete – there are lots of easy invoicing solutions with accounting software or specialist packages. The sooner your client knows how much they need to pay and when, the better. You’ll also pick up any issues more quickly.

Use technology

There are plenty of ways to automate and ease the payment process using technology. Remove manual time by using credit control tools that can send automated emails on your behalf to chase debtors. You can use Stripe to include direct payment links on invoices. The arrival of Open Banking will also make it easier for your clients to pay. 


More in, less out

Undertake a full review of your pricing and expenditure. Is there room for increasing profit? This might mean increasing prices for products and customer segments who can cope with it. This isn’t always an easy process; be brave and don’t be afraid to experiment. Improve your working capital by improving your margin overall for the long term.

Deal effectively with bad debt

This means taking measures such as credit checks if you are worried about a client’s ability to pay. If you find yourself with a client who is unwilling to pay, an effective option is to download and complete the application required to take them to a small claims court. Attach the form to an email to your client explaining your intentions to progress. This can really help with payment, but be prepared to follow through.


Finally, look to the future

Having a view of what your bank balance will be in the future is important as it means you can anticipate any needs and see any threats ahead of time. Cashflow forecasting can help with this. Your forecast can help to make wider strategic decisions that guide the direction of the whole company. It’s possible to build a cashflow model using Excel where you input assumptions yourself, or tools which plug into your financial data and produce an instant, automated cashflow forecast.
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