Cash - you can never have too much, but you can often have too little. Staying on top of cash flow is critical for every business. These 10 tips will help you boost cash flow.
- Invoice as soon as possible. It’s far better, from a cash flow point of view, to bill throughout the month than stick rigidly to one billing day, often at the end of the month.
- Give it focus. Cash flow is the most important element of your business. Don’t delegate the task and ignore progress. Let everyone in the business know how important it is, give it emphasis and manage.
- Pick up the phone. Too many businesses are afraid to chase payments. Don’t be. Pick up the phone – sometimes you’ll be surprised by how quickly the money comes in as a result.
- Hire a great credit controller. Chasing money isn’t everyone’s favourite job. It requires determination. You need someone who is a good rule follower and will stick to the company line and not empathise with those who try to delay.
- Offer direct debit or standing orders. Direct debits can be one of the quickest ways to boost cash flow, it reduces admin and helps with your financial planning as you know which direct debits are due for payment, when.
- Look at when and how you pay VAT. If your VAT-taxable turnover is less than £1.35m you might consider switching to HMRCs Annual Accounting Scheme for VAT which allows you to spread payments helping you to avoid large cash fluctuations. Alternatively opting for the Cash Accounting Scheme for VAT will mean you don’t have to pay VAT on sales until you have been paid.
- Credit-check clients. Credit checking clients can help filter out those that are likely to have problems paying your invoices. You might then insist on payment up front or refuse to supply.
- Use email. E-invoicing can help cut costs and delivers your invoice sooner. Using tracking facilities can also provide ammunition when you have to chase for payment and a customer claims never to have received the invoice.
- Take credit cards. Cheques can get lost in the post, you may not want to handle cash, but credit cards make it easy to take payment in person and over the telephone.
- Cut costs. Always be on the look-out for ways to minimise costs in your business. Ask – ‘does this save money or make money?’ If it doesn’t think very carefully about whether you really need it.
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Andy Parker
Chartered Accountant