With credit tight and money becoming an ever-more-precious commodity, cash flow management is increasingly important for the small business community, explains Darren Fell, of Crunch Accounting.

Banks might not be lending cash and clients aren’t helping either, with late payments appearing a problem that’s endemic across the continent.

The coalition is trying to ease things through various schemes, but the reality is that they’ll take time to have the desired effect. Still, there are some small steps businesses can take to help ease their cash flow concerns, and methods that can help to improve cash flow almost immediately.

1. Invoice ASAP

As soon as a job is wrapped up get your invoice out there quickly, as barring any external hiccups this ought to speed up the payment process. That said, don’t rush and let mistakes at your end lead to potential delays. Ensure you’ve completed the job to spec and you’ve put together an invoice to match.

2. Establish a stringent system

Using some project management software, a spreadsheet or even just pen and paper, keep track of your payments and deadlines and chase up anything that needs chasing. Be proactive with your reminders and don’t be afraid of the phone – sometimes clients need a nudge to get things moving.

3. Embrace cash flow forecasting

Try to get your head around the basics of cash-flow forecasting. This involves calculating your potential income and expenses, with these respective figures helping you anticipate for any shortfall month-to-month. Forecasting is an integral (and often overlooked) part of cash-flow management, and ought to be done regularly. These figures can inform your wider strategic decisions.

4. Incentivise speedy payment

Incentivising early payment can help to ease short-term cash flow concerns, and the prospect of discounts and credit can appeal to some clients. Do some sums and see what the average late payment costs you, then, once that’s established, work out a discount from there.

5. Seek deposits

It can be a good idea, where possible, to request  a deposit up front, especially if the job’s a big one and you’ll be investing a lot time. Not only will this get some cash through the door quickly, it’ll provide some insurance, leaving you with a little cash should a job fall through.

6. Consider credit checks

If you’re worried about a client’s capacity to pay, then a credit check can help alleviate your concerns. They can be cheap and easy to carry out and may prove a worthwhile investment – especially if they help you avoid those more troublesome clients.

7. Cultivate good relationships

Establishing good relationships with clients and suppliers can ease cash-flow concerns, in the respect that there may be room for leniency and flexibility should you be facing financial problems. Appreciate that this is two way street, though, and be willing to help them too.

8. Free up assets if cash flow is becoming a problem

If your finances are erring more and more into the red, cast a critical eye over your assets and see what you can consider selling. If that’s not an option then perhaps lease out an asset or two – this will enable you to retain them whilst bringing some cash into your business.

9. Explore alternatives to the banks

As successive stories show, the banks aren’t always too helpful with credit right now, so if you’re struggling to meet your financial demands look at what else is available. Suppliers may be an option (if it’s in their interests to keep you afloat) while crowdfunding and peer-to-peer lending can release emergency funds quickly, and often at a lower rate than traditional lenders.

10. Finally, don’t confuse turnover with profit

A spike in sales can lead you to think that you’re in good financial health, but it’s important to note that with this can come increased expenses too. Appreciate the distinction between turnover and profit, and keep a keen eye on your outgoings.

Darren Fell cashflow

Darren Fell is managing director of Crunch Accounting, which offers online accounting for small businesses, contractors and freelancers. 


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