Telling the truth about SME life today

Managing Your Cash Flow

Tom Phipps, a director at Livingstone London, considers the best reasons and timings for moving on.

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Marcus Young is partner and Layla D”Monte is an associate in King & Spalding’s London office, they have co-authored


Learn from other companies and industry experts on how to approach your bookkeeping and tax systems to stay on top of cash flow, regulation and expense management.

No business will inspire stakeholder or employee confidence without evidence of a steady cash-flow. What’s more, businesses, especially SMEs who are more at risk because of their small budgets, will be less likely to secure funding if they do not have a proven track record of financial stability.

Whilst many SMEs simply do not have the capacity to hire a full-time accountant or bookkeeper, business owners themselves can learn and develop relevant skills in order to stay up to date and in-the-know about their company cash-flow situation. Business owners have a variety of options available to them to help manage their cash-flow, this includes easily accessible online courses, to accounting management software. Thankfully technology now provides shortcuts for business owners meaning they do not have to be a qualified accountant to manage their company’s finances effectively.

This section is dedicated to helping businesses and business owners choose the cash-flow methodology that suits the size and scale of their company. This section will include advice on how to manage your books, handle late payments and choose the right accounting software. For companies with an accounting budget, this section also offers logistical advice on choosing the right kind of accountant or accounting service for your business, depending on your sector and budget.

If you don’t effectively monitor and maintain your company cash flow, you risk your business going into the red. Even if you avoid such a risk, precarious management of cash flow will also dissuade investor interest and put off established lending providers.

Not knowing where your company is at financially means you cannot make any decisive, or potentially brand defining moves such as product launches. You also cannot prepare to weather financial storms effectively, and with the Brexit deal slowly looming, it’s important that companies create contingency plans for this reality by preparing their finances accordingly. And if you’re not aware of what your cash flow is, you cannot prepare for the future with certainty. Lack of cash flow management also means businesses are more likely to pay suppliers and other dependants later. A reported 27% of UK invoices are paid late, and doing so will make your business less attractive to gig-economy employees and suppliers who will choose to engage in business with companies that pay on time.

Global companies wouldn’t be satisfied with simply looking buoyant on paper, so neither should SMEs. A smaller workforce and company budget doesn’t mean SMEs are exempt from the same cultural rules that dictate company reputation through evidence of solid in-and-out cash-flows. Despite promising starts, less than 50% of small business are still trading after give years, and key to this sad statistic is a lack of cash-flow management. Just as bigger corporates take the time to make financial projections and make contingency plans accordingly, SMEs must do the same by managing their cash-flow via their own budget-sensitive methods.

You don’t need a massive budget to manage your financial situation. Whilst bigger companies can employ in-house accountants or use a firm periodically, SMEs can take advantage of technological advancements are use accounting software to take the edge off managing your cash flow responsibilities. There are numerous digital applications that allow business owners to see and manage their cash flow, this is especially important for business owners who lack financial literacy. Crucially paying a subscription free for related software will most likely not cost as much as a full-time accountant’s salary nor a practice’s service fee.

Maintaining a functional administrative process in your SME when it comes to cash-flow is just as important to your brand identity as your sales performance and level of employee wellbeing. Late payments and laborious related administration processes will not make your company look viable to stakeholders, potential investors or your suppliers. By having strategies in place, whether that is cash-flow tracking and monitoring technology or physical accountancy aids, businesses will be less likely to engage in late payments. If business owners have a concrete understanding of their cash-flow, they can plan ahead to ensure on-time payments and ensure a better company reputation.

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