Managing Your Cash Flow

How to help conquer cash flow and unlock your business’ potential

7 min read

02 November 2015

Former editor

Knowing your finances are in order not only gives your business a solid foundation, it can also free you up to be more innovative, agile and better able to look outward to external challenges such as competition – all of which will better support future growth.

In association with American Express.

Businesses large and small, online or digital, generally suffer from cash flow challenges at one stage or another – the key is to have some simple but important systems and practices in place to help manage the situation.

These can include the following:

Keep your books in order

Knowing where you stand sounds like a fairly obvious piece of advice, but many business owners find they are unable to quickly place their hands on important sales figures when required to do so.

Furthermore, if you need to gain access to a line of credit quickly, to make a big order, deal with a tax bill or pay business rates, then an up to date set of books, whether online or offline, is going to save a lot of time and hassle. This especially applies at the end of a tax year whether you are doing the final returns yourself, or are handing them over to an accountant.

If you rely on a system of sifting through piles of paper receipts it can be a fairly onerous process, but technology can be a big enabler. With the right software tools, bookkeeping can go from something that was dreaded and avoided, to a simple task that actually provides you with valuable business information.

Forecast when you might have lean periods

Young or newly established companies, that haven’t had the benefit of a history of financial reporting, need to pay particular attention to sales cycles and customer payment terms to have a better idea of what is required to stay on top of affairs.

The majority of small business leaders will find it useful to compare current financial status with future financial obligations. This practice can also help pinpoint a possible cash flow problem early enough, to provide the time and tools required to mount an adequate response. Dealing with key dates such as business rates or VAT payments can be made easier with this kind of approach. Businesses making a significant outlay on raw materials long before they can be recouped through sales, such as a company manufacturing furniture, will find this type of forward planning essential.

If possible, try and build up an appropriate financial buffer so that you are not caught out – this is especially relevant for seasonal businesses, which may have an unbalanced sales period weighted towards Christmas or the summer.

Build good relationships with suppliers

This is the case with both businesses you sell to, and those you purchase goods from. Being on good terms with a supplier you are sourcing items from generally means you can negotiate flexible payment terms more easily. Likewise, when you are dealing with money coming in, maintaining a good relationship means you can have honest conversations when any chasing is required.

Harmonious suppliers are more likely to be flexible; perhaps offering each other discounts, and can also be a first port of call for new products or services – often a source that can be relied on for years to come.

Some one in five business owners surveyed cited cash flow as a hurdle to growth in the American Express® annual Small Business Barometer survey 2015*.

Stacey Sterbenz, from American Express Small Business Services, said: “While managing and dealing with challenges is part and parcel of running your own company, getting a better handle on the financial management should help you rise to the competitive challenge and better focus on how to grow your business.

“Our cardmembers tell us they value the flexibility our cards offer and feel more in control of their cash flow with benefits such as the no pre-set spending limit (1) and extended payment terms (2). The ability to track all of their business expenditure (including balance, past statements and available credit) from wherever they are, via our online account management system also assists with their forecasting.”

There is no magic formula to conquering cash flow, more a collection of good practices which, when combined, create a solid and stable business base from which to compete. In an ever-growing population of ambitious British small businesses, this footing is one you can’t afford to not have.

To find out more about how American Express Business Cards could help you manage cash flow, whilst earning rewards on virtually all your spend, visit the American Express website.

*The American Express Small Business Barometer was commissioned by American Express and conducted by market researcher Coleman Parkes in summer 2015. The research polled 500 decision makers in businesses with under 50 employees in the UK.

Terms and conditions:

(1) No pre-set spending limit does not mean unlimited spending. Purchasing power can adjust with your use of the card, your payment history, credit record, financial resources known to us, and other factors. We reserve the right to apply temporary spending limits in accordance with the cardmember agreement.

(2) The maximum amount of time for deferred payment on purchases is 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date.

Click here for full terms and conditions.

American Express Services Europe Limited has its registered office at Belgrave House, 76 Buckingham Palace Road, London, SW1W 9AX, United Kingdom. It is registered in England and Wales with Company Number 1833139 and authorised and regulated by the Financial Conduct Authority.

Next: Facing challenges: The businesses undeterred and winning