For many SMEs, efficiently managing cash flow can mean the difference between success and failure. With the first quarter of the year usually being a time when many SMEs have difficulty with cash flow, forward thinking and planning ahead can help save you many a headache.
(1) Monitor your cash flow
You may think of a cash flow forecast as something you include in a business plan, or use when seeking funding, but it’s an incredibly useful thing to do on an ongoing basis. Month-on-month forecasting lets you plan ahead, determine your financial position and predict when you might run into difficulties giving you the ability to make sure you have enough income to cover your outgoings.
(2) Make friends with your accountant
Many of us are guilty of only speaking to our accountant once a year, usually around the time that a tax return is due and typically without asking any questions, but they can be a fantastic source of money-saving information and advice. It is always worth identifying areas for improvement and ascertain whether there are any ways you can reduce your tax bill.
While accounts arent due until nine months after the end of the accounting period, sending them to your accountant straightaway can also help you get ahead of the game. Accountants won’t charge you extra for being well organised, and you’ll have your figures sooner, as well as being sure to avoid a late filing penalty or interest on late payment.
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(3) Credit where credit’s due
It’s exciting to bring new business on board, but it can also be expensive if you perform services or order stock in advance of payment. It’s therefore wise to have new clients complete a credit application form in addition to the usual contract and agreement to T&Cs. Ideally, you should raise invoices with partial or full payment in as this will ease your cash flow.
If this isnt possible, you need to weigh up whether you’re willing to extend credit. Make sure you perform due diligence on any new clients it’s easy to perform basic checks using free services such as Duedil or Company Check before deciding whether to purchase more in-depth reports, so theres no excuse.
(4) Invoice throughout the month
Many businesses make the mistake of bulk invoicing at the end of each month, potentially leaving themselves short if and when unexpected expenses crop up. Its good practice to spread invoices out throughout the month where possible, as this will provide a more steady flow of income. Many accounting programs allow you to schedule recurring monthly invoices, so it neednt be a chore.
Read on to find out how to use the credit you already have wisely.