Why Cash Flow Is Crucial
Cash flow is the lifeblood of any business. While profit is important, positive cash flow is what keeps your business operational day to day. A profitable business can still struggle, or fail, if it doesn’t have the cash to pay suppliers, wages, and tax bills on time.
Understanding Cash Flow
Cash flow refers to the movement of money into and out of your business. Positive cash flow means more money is coming in than going out. Negative cash flow can lead to funding gaps and late payments.
It’s essential to monitor both:
- Operating cash flow (from daily activities)
- Financing cash flow (loans, repayments)
- Investing cash flow (equipment or asset purchases)
Common Causes of Cash Flow Problems
- Late-paying customers
- Poor forecasting
- Seasonal demand
- High overheads or fixed costs
- Over-ordering stock
- Rapid growth without cash reserves
Practical Tips to Improve Cash Flow
1. Invoice Promptly and Clearly
Send invoices as soon as work is completed. Make sure your payment terms are clear, and follow up on late payments without delay.
2. Shorten Payment Terms
Instead of 30-day terms, consider 7- or 14-day terms for smaller jobs. Offer small discounts for early payment if appropriate.
3. Monitor Cash Flow Regularly
Use accounting software to review cash flow weekly or monthly. This helps you spot trends and act before issues arise.
4. Reduce Unnecessary Overheads
Audit your expenses. Are there subscriptions or services you no longer need? Can you renegotiate contracts or switch suppliers?
5. Build a Cash Reserve
Try to set aside funds during more profitable months to cover leaner periods. Aim for at least 1–3 months of expenses as a buffer.
6. Use Direct Debits and Payment Plans
Encourage clients to pay by Direct Debit to improve reliability. If your outgoings are large, look into spreading payments across the year.
7. Lease Instead of Buying
If you need equipment or vehicles, leasing can spread the cost and protect your cash reserves, even if it’s slightly more expensive overall.
8. Apply for a Business Overdraft or Credit Line
Having pre-approved finance in place gives you flexibility during tight periods. Don’t wait until you’re desperate to apply.
Cash Flow Forecasting
A basic forecast helps you plan ahead. Estimate your expected income and expenses for the next 6–12 months. This lets you:
- Plan for VAT or tax bills
- Avoid cash gaps
- Make confident investment decisions
Your accountant can help build a realistic, flexible forecast.
Why Work with A Wigglesworth & Company?
Based in Doncaster and trusted nationwide, we help small businesses take control of their finances. From improving invoice systems to building tailored cash flow forecasts, our advice is always practical, clear, and results-focused.
Get Support with Cash Flow
If cash flow is holding your business back, we can help. Contact A Wigglesworth & Company today for personalised support and proven strategies.