Cash Flow Management

Some businesses fail because they have no customers, some businesses fail because they execute poorly, but a lot of businesses go under because of easily avoidable cash flow problems.

Similarly, businesses that thrive and grow always and without exception have a good handle on cash flow.

Putting in place a few simple procedures and planning ahead can give your company the iron grip on the cash flow it needs.

What is cash flow management?

Cash flow management is the process of tracking and logging how much cash is flowing in and out of your business. When and how much…

It helps you as a business owner get a real grip on how much money you have to play with to pay bills, make investments, expand, pay a dividend etc

Having a good feel for your cash flow means you’re never spending when you shouldn’t and you’re not caught out by an unexpected bill that you simply can’t pay on time.

Getting paid

I don’t think we need to state the obvious here! But cash coming in is the most important part of a business. You can be great at everything else but unless cash is coming in through the door (preferably thick and fast!) you’ll struggle.

Getting customers is down to your marketing and sales process but getting paid quicker and by default assisting cash flow is something you (we) can do.

Start by putting systems in place to help smooth the payment process:
eg:

  • Make sure invoices are sent quickly
  • Give people several ways to pay
  • Consider setting up direct debits
  • Be very clear on your payment terms
  • Incentivise early payment with discounts
  • Have strict penalties for late payment
  • Put together a robust credit control process

As an RJF client, we would assist you with all of this and more to ensure you are getting money flowing in as quickly as possible.

Recovering debts

This always has a slightly bitter taste to it. We understand, you don’t want to sour the relationship with a client, you don’t want to start banging the door down either… But there are ways of getting paid what’s owed and keeping the client relationship strong.
(We had a situation at RJF where a new client had over £250k in outstanding bills with one customer. We were able to get that paid quickly without causing any friction. The fact we were involved as a “friendly middle man” made the process more palatable for all)

Despite that our partner Rob is known for the odd charity white-collar boxing match… we aren’t a debt collection agency!
But we can definitely help you get invoices settled in a professional manner putting you in a stronger cash flow position.

It’s also worth noting that with a robust credit control process you should never be in this situation again.

Cash flow strategy

This involves sitting down and looking at all the numbers from a birds-eye view. Invoicing is one piece of the puzzle but there other factors to consider and address, including:

Cutting or delaying expenses
Changing your payment terms with suppliers
Negotiating with HMRC
Sell or lease unused assets – Warehouse/office space/equipment
Managing stock levels and improve inventory control
Adjusting the workload for more productive and efficient fulfilment
Assessing client profitability
Increasing margin

Ultimately it’s a game of analysing your current situation, identifying areas of improvement and then coming up with a plan for each specific area. Then it’s constantly assessing how the new plans are working and making adjustments where needed.

Having a good cash flow strategy is a very nice place to be.

As a business owner you feel in control, you know what’s coming up and that you aren’t leaving anything to chance.

Stock levels; e-commerce

Being heavily involved with e-Commerce, one thing we know only too well is the impact inventory control has on cash flow!

Get it wrong and you can be sitting there with a load of cash tied up in stock, waiting for it to turn itself into income.

Inventory turnover, obsolete stock and reduced sales are just the tip of the iceberg.
Getting good real-time inventory management and having a good grip on inventory control can help you plan more effectively and have far better cash flow.

Cash flow projections

Accurate cash flow projections allow you to predictably plan ahead for the future. Knowing how much cash you’ll have at specific points in time help you manoeuvre and shuffle liabilities around to coincide with cash-rich windows.

Where many businesses go wrong is they can find themselves in an awkward situation where they may have money due and coming in soon, but the bills are due now and so may incur late payment fees, court action or worse…

Having a good understanding of your own company cash flow cycles can help you prepare and thrive.

You’ll be able to better understand things like:

  • Can you offer a new service or product to your range?
  • Do you need to borrow money now to weather a small storm later?
  • Should you be making that new hire now or waiting for a quarter?
  • When is the best time to draw down money from the business?

Your business is unique, each company has its own demands, needs and sector quirks.

Become a client at RJF and we’ll use our expertise to work with you to provide good reliable cash flow management. Giving you the insights, data and information you need to make strong business decisions for profitability and growth.