Managing cashflow when times are tough
Inflation is one of the biggest challenges facing business at the moment and small business owners are among the worst affected by rising material and energy costs.
Being able to manage cashflow effectively is key to survival when times are tough.
One of the best ways to manage company money is using cloud-based accountancy software like FreeAgent or Xero, along with support from a specialist accountancy practice.
Here are some tips to help you manage your company’s money more effectively.
Prioritise cash in hand
Profit is great way to measure business success. You might think your business if profitable, but you could run into trouble if you don’t have the cash available when bills or wages become due.
This is why it pays to focus on cash in hand when times get tough. This means you should pay attention to the money coming in and out of your business accounts.
If possible, try to keep a steady flow of money coming in and keep track of when expenses will come out of your account.
Cloud accounting software packages like Xero and FreeAgent can create cashflow forecasts based on your income and expenses.
Open up to your suppliers
Keeping income and expenses in check is difficult. Sometimes you simply can’t afford to pay a supplier bill when it’s due.
If this is going to happen to you then it’s crucial you let your suppliers know in good time. If you have a good relationship with your supplier then they might be willing to give you an extension on a payment.
If you don’t let a supplier know ahead of time then it will go down as a missed payment. This can quickly sour relationships, affect business operations and damage your credit score.
Pay attention to late payers
The late payment of invoices is one of the biggest threats to small business cashflow.
You can improve the financial health of your business by getting late paying customers under control.
Cloud accounting software like Xero and FreeAgent helps you identify problematic customers and keep a watchful eye on their invoices.
The software can also help you be proactive in getting invoices paid. With Xero and FreeAgent you can send automatic invoice reminders so you’ll never need to send a chase email again.
With prices for business essentials rising, it makes sense to trim non-essential costs as much as possible.
Some costs will be easier to cut than others. If your business is doing ok financially then you can concentrate your efforts on the most painless cuts.
If your business is in more serious financial trouble then you may have to be creative to try to slim down expenses without affecting business output.
With energy and fuel costs rising, one way you could do this is by switching to remote or hybrid work and closing all or part of your office.
Keep your head up
Life can feel very tough when your business is struggling financially. But lots of small business owners are in the same boat.
It helps to think about the good times and remember why you set up your business in the first place. Running your business won’t always be this tough and if you can stay positive then you give yourself the best chance of success in the long run.
For more information about cloud accountancy software and support, speak to a member of the team today. Call: 0808 281 0303