Some ideas to get on top of your cashflow

Having a good grasp of your finances is always essential but particularly now if you're concerned about how the current financial climate will affect your business. By Dominic O'Sullivan

No cashflow equals no business. Here are some tips for getting a grip of your cashflow:

Get paid on time. You've supplied the goods or services but not been paid. It's your money and it should be in your bank account.
Pay on time. You will also reduce your risks by paying your suppliers on time, helping ensure your whole supply chain stays in the black.
Reduce your stock levels. Money unnecessarily tied up in stock is money that's not in your bank.
What is your break-even point (profit margins)? How much of a cushion do you have? If sales/contracts don't make you much profit, even a small increase in costs or a tiny drop in turnover could push your business into the red.
Monitor cash in and out of your business on a daily or weekly basis – don't delay until your VAT returns and annual accounts. Make good use of your bookkeeping or accounting software to generate reports that tell you how the business is performing now. You could start your own spreadsheet if that suits you best.
You should avoid chasing sales with a low profit margin, if the same effort will secure sales with higher profits. So calculate the profit for every one of your products and services and focus your efforts wisely.
Be realistic about what you can and can't change. Prepare an honest forecast of sales, profit and cashflow, and be brutal with yourself about what needs to change. Do this regularly, so you always know what's going on and can respond quickly to possible problems.

Dominic O'Sullivan is an advisor with Businesslink

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Business Link service offers free, impartial guidance and advice – phone 0845 600 9006 or visit www.businesslink.gov.uk