Cashflow Management – the only way to keep your business alive

As it grows from a mere thought into a living and breathing entity, it’s an obvious success – that is, of course, until the cash runs out, which is likely to be the end of the line.

Therefore, it’s safe to say that it makes sense to put as much effort into keeping the business alive and well, as you do in creating your masterpiece. The way to do this is by very realistic forward planning.

Keep the money flowing
Start with a week-by-week cash flow plan for the year ahead. This plan must be made up of a realistic assessment of what income will be coming in, and when, but that also covers all the major outgoings like:

– Tax Payments
– Subscription fees
– Technology
– Utilities
– Travel
– Staff
– Premises
– Stock and raw materials
– Insurance

Don’t assume the worst-case scenario, as thoughts like that may hold you back from starting the business in the first place. The plan does need to be based on the lower end of the estimated sales range though, followed by an attempt to monitor your costs closely, ensuring you stay within budget.

Try to be disciplined and leave out sales revenue or contracts that you are unsure of – they don’t fall under the ‘realistic’ category. The basis of a cash flow plan is to know whether the business can make it, even if everything doesn’t go your way. . Follow-ups, or ‘reforecasts’ are as important as the initial draft, so review and amend the plan often to see how it compares to actual results and to make sure it reflects the latest trends and impacts on the business, such as: better or worse sales than expected, new contracts, changes in staff or supplier pricing.

You can always get more cash.
Some businesses are non-cash businesses, so if yours falls under this category, you should think about customer payment – try to figure out how payments will be taken. You could ask for customers to pay via direct debit or you may want to offer a small discount if some choose to pay early. This will ensure regular cash flow and valuable time will be saved as you won’t have to deal with chasing payments – two things that will benefit you more than a little extra revenue.

The success of any business is in its customer service and the relationship that’s built with customers. Delivery of service/products must be on time, high quality and consistent, as it’s the number one way to keep customers loyal and happy. Notwithstanding this however, try and keep your fixed overhead costs as low, and lean, as possible – especially in the early days of the business. This way, more cash is free for covering any difficult periods and you’ll have greater flexibility to respond to changing customer demands or issues with the business.

The tough times don’t need to be so tough
In some ways, a business is like a living organism – a myriad of internal and external things can impact on its fortunes, so it’s possible that at some point there will be tough times. If so, it makes sense to cut out any discretionary costs and only allow money to be spent on vital things that keep the business running. Try and cut costs wherever possible and look to working out cheaper ways to get the same results.

If you have a good track record and enough credibility you can try talking to your bank – it works a lot of the time. By maintaining a good relationship with your bank you could get the support and help you need, such as a short-term overdraft.

The taxman knows where you live
If you forget to pay the taxman, he will get you! There’s no shame in admitting that you might be struggling, so the smartest to do is to let him know of your troubles. You won’t be ignored, so by contacting HMRC and explaining your cash-flow issues you are spared the dreaded phone call from them later on.

If you act early, the chances are that you will be allowed a ‘time-to-pay’ arrangement, where you will be given time to pay outstanding amounts by instalments over an agreed period. This may avoid penalties or interest and the HMRC won’t be knocking down your door to collect overdue tax payments.

John Hoskin is a director of CleverAccounts.com, an online accountancy firm that seeks to simplify the task of business accountancy. Paying a fixed monthly fee, small businesses, limited companies, sole traders, freelancers and contractors have access to accountancy, business-set up and tax planning services, simple-to-use online bookkeeping, a 24/7 view of their figures and on-going tax advice.


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John Hoskin

John Hoskin initially trained and worked as an accountant and consultant at Deloitte for five years. He then spent the next 13 years working as a Financial Director in businesses across the transport, outsourcing and healthcare sectors and running his own accountancy practice, before founding CleverAccounts. John and his co-founder Chris Mollan, wanted to provide a service that used modern technology to give small businesses and self-employed individuals access to all the accountancy functions they needed but without the crippling costs of a larger firm and with better levels of service and greater simplicity and clarity that they often receive.

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John Hoskin initially trained and worked as an accountant and consultant at Deloitte for five years. He then spent the next 13 years working as a Financial Director in businesses across the transport, outsourcing and healthcare sectors and running his own accountancy practice, before founding CleverAccounts. John and his co-founder Chris Mollan, wanted to provide a service that used modern technology to give small businesses and self-employed individuals access to all the accountancy functions they needed but without the crippling costs of a larger firm and with better levels of service and greater simplicity and clarity that they often receive.