With talk in the news of doom and gloom as far as the financial climate is concerned, it’s no wonder that small business owners are beginning to worry. ‘Cash is king’ is the popular phrase in business circles and with no cashflow, you have no business. Below are seven steps to help you get control of your cashflow.
1. The most important step is to make sure you get paid on time. You’ve bought the goods, you’ve supplied the goods, make sure you get paid for the goods. Offering a small discount for paying early could reap benefits.
2. Make sure you pay on time. Your supplier is within his/her rights to charge you interest on your unpaid bill. By not paying on time you might start incurring interest at a hefty rate. By paying on time you also reduce the risk of your supplier going out of business. This means you won’t have to go searching for another one later down the line. By paying your bills straightaway they don’t grow and become too much for you to cope with. A sum of £100 now may still seem like a hefty sum, but £300 another couple of months down the line, will be even harder to pay.
3. Knowing exactly what your profit margins are and what your breakeven point is will give you a better idea of how your business can weather any coming financial storm. Knowing this information will help you prepare should there be a drop in sales or a price rise from your supplier. If you aren’t able to work these figures out, make a point of finding someone who can. This information will be invaluable to you.
4. Keeping up to date with your accounts on a weekly rather than monthly, quarterly or annual basis may help you to identify any problems before they become serious. Make good use of accounting software and bookkeeping courses to help you keep on top of your accounts. Knowing what the figures mean and how to deal with a change in them may mean the difference of staying in the black or wandering into the red with your bank.
5. If yours is the type of business where you can pick and choose your jobs, make sure you go for the ones with the higher profits. This may sound like common sense but in times of a financial squeeze, you may find you’re eager to take any job you can get. By taking any job you can you may not be focusing on going after the more profitable jobs available to you.
6. By reducing your stock levels you have less money tied up in the stock and more money in the bank. If you have a business savings account alongside your business current account, make sure you keep money sat here rather than your current account. You get paid more interest in the savings account.
7. Think about the future. Preparing a forecast of your sales, profits and cashflow means you can respond to any possible changes especially if this is done on a regular basis. Be realistic. Making changes can be quite a challenge if they become too big to cope with all at once and may lead to disaster. If the changes to be made are substantial, try breaking them down into smaller chunks that are easier to implement.
This is not an exhaustive list. Keeping on top of your cashflow is of prime importance. If you require help with any business issue there are places you can find support. Speaking to a qualified bookkeeper can help clarify some points where you may not be entirely sure. Business advisers are another port of call with Business Link being the biggest network in the UK.
Whatever your situation, being prepared will stand you in good stead whatever the financial weather.
