Cash is one of the most vital elements of running a successful business. Adrian Peck and Richard Mason share their insights and expertise to provide four key tips to managing the cash in your business. With a free financial assessment available for your business full of tailored advice, you can be well on the way to gaining control of your cash situation. 

So, when it comes to managing cash flow,

here are the four key things you need to know…

1. Know the right questions to ask

Many businesses tend to focus on profits, rather than on cash flow, but it’s how that profit translates to cash that is really important, particularly for businesses who want to fund growth. 

Working capital is the wheel of the business, so you need to understand all of the cogs that help it turn. How quickly are your debtors paying? How quickly do you pay your creditors? Where are you with your HMRC liabilities? What does your cash flow management look like? 

The answers to these questions can give very clear indications on how to improve the business cash flow. Ensure you are getting a good level of credit from your suppliers and that your customers pay to the agreed terms, and don’t be afraid to charge a penalty if they are late. Small businesses can often fall victim to larger businesses who don’t want to pay on time, and when this happens it’s a real issue for cashflow. 

2.  Make cash flow projections 

Often business owners can be so passionate and knowledgeable about the industry they are in but feel completely out of their depth when it comes to managing the finances, and may even have a tendency to leave it to the accountant to worry about. This is a huge mistake, burying your head in the sand won’t help resolve the situation. 

The best way to manage it is to plan and understand, on a daily basis, what your cash balances are. Ideally project forward for the next three months, but as a minimum project to the end of the month. That projection will mean that you’ll know what your bank balance will be at the end of the month. 

Having these projections also means that, if a problem arises, you’ll have more time to find a solution. Without this foresight you’ll have little chance of turning the issue around, posing a real potential risk to the business. 

3. Know your magic number 

Is there a minimum level of cash that you need in the bank at all times? If so, what is that magic number? Do you have a contingency in place? What happens if something comes up expectedly? What if a piece of equipment needs replacing, a creditor wants to be paid sooner or a debtor doesn’t pay their invoice on time? Can you cover it? 

4. Define your payment terms 

“We’ve just won a nice project, but we need cash to get started”. A common issue which businesses can face, but our advice is don’t be afraid to ask for a proportion of the payment upfront to kick start the project and define payment milestones during the project. Don’t just focus on the revenue or profit that the project will generate, but remember the need for cash to fund the resources needed to deliver that project. 

Other options for financing a new project might be short term lending, but this can become expensive if you don’t repay quickly. Another option to help with cash flow is to ask suppliers about extending your payment terms. 

Cash flow needn’t be scary or difficult, it just needs managing. If you want to understand how your business is performing financially, take our free financial assessment and see your financial health score, plus get a report full of advice on how to improve. 

Want to check the cash health of your business and understand how to improve?  

Our free financial assessment takes just 4 minutes and provides you with a tailored report of expert advice on how to improve the cashflow within your business. 

Visit www.betterneverstops.global/cashreview  

Remember you can catch the full interview with Richard Mason
on YouTube at LoveYourBusiness.TV or on our
Better Never Stops Facebook page Facebook.com/BNSLiveYourDream/