Cash flow is the lifeline of any business. While profits are important, cash flow keeps everything running smoothly. Without effective cash flow, even the most profitable businesses can run into problems.
At Hanley & Co. Accountants, this month’s blog offers advice to help you manage and improve your business’s cash flow. For more information, call us in Staveley, near Kendal on 01539 821869.
What is Cash Flow?
Cash flow is the money that flows in and out of your business. Incoming cash comes from sales or services, while outgoing cash covers business expenses such as salaries, rent and taxes.
It is essential to understand that cash flow is different from profit. Therefore, monitoring your cash flow is important. A healthy cash flow ensures your business has enough money to keep daily operations running smoothly.
Streamline Your Invoicing
One of the easiest ways to improve your cash flow is to streamline your invoicing practices. Many small businesses struggle with poor cash flow due to delayed payments from clients. One way to improve your cash position is to review your invoicing process.
Ideally, invoices should be sent promptly so you can reduce the time it takes to receive payments. Using cloud accounting software that automatically generates and sends invoices can also relieve the pressure.
Create a Cash Flow Forecast
A cash flow forecast is essential for any business. It helps you to plan for future expenses and predict shortfalls. Creating a forecast involves you mapping out your expected income and expenses over a certain period. This allows you to plan accordingly.
Manage Expenses Strategically
It is important to manage your outgoing costs carefully. Regularly reviewing your expenses can reveal where you can save money. Switching providers or merging contracts can sometimes reduce monthly outgoings.
However, cutting costs should be done strategically. If you remove essential services, or staff, it can be more damaging in the long term.
Have an Emergency Cash Reserve
An emergency cash reserve provides a safety net that can help your business with unexpected expenses or downturns. Having money set aside ensures you won’t struggle to cover these costs.
For UK businesses, having an emergency cash reserve is important when it comes to uncertainties such as fluctuating exchange rates, changing tax laws.
Seek Professional Advice
Partnering with an accountant like Hanley & Co. can provide invaluable support when managing your cash flow. Our team can provide expert advice when assessing financial risk and develop strategies to protect your business.
At Hanley & Co. Accountants, we can help you interpret your cash flow reports and create accurate forecasts.
Contact Hanley & Co. Accountants
If you require accounting advice, contact Hanley & Co. Accountants in Staveley, near Kendal. Serving across Cumbria, call us on 01539 821869. Alternatively, send us a message via our contact form and we will be in touch.
