When your business cash flow dries up, problems start to multiply. Here are five simple tips to keep that cash flowing.
1. Have a system in place to manage your debtors
Come up with a clear, step-by-step process for handling outstanding accounts.
This might include:
- Sending a reminder email for unpaid invoices.
- Making a phone call or sending an email when an amount has been outstanding for a certain period.
- Sending a late-payment letter explaining what your next steps will be, such as passing the account to a debt management agency or adding interest.
2. Be prepared for tax time
One of the fastest ways to run out of cash is to find yourself short at tax time.
Create a system that helps you put enough money aside each month, so you are never caught short.
- Sole traders: Consider setting aside 20% of your income.
- Limited companies: Consider setting aside 25% of your income.
3. Avoid using business funds for personal spending
It can be tempting to dip into your business account to cover personal spending.
Keep separate bank accounts for your business and personal finances. If you have saved more than you need by the end of the tax year, you can give yourself a well-earned bonuswhich is much better than being caught short.
4. Sell old stock
Do you have more stock than you need?
Consider selling old stock, furniture, machinery or even unused stationery. This can free up valuable space and provide your business with a useful cash injection.
5. Forecast your cash flow
Create a cash flow forecast to help you monitor and measure the money coming into and going out of your business.
Need help with forecasting, tax savings or cash flow management? Were here for youjust send us a message or give us a call.