So often in business we spend all of our time and energy focusing on the bottom line, however a profit on paper doesn’t necessarily mean the bills are getting paid. The old mantra of Cash flow is king could not be truer. So how can you improve your cash flow?

1. Use an accounting system

Without having good usable data it is impossible for you to keep track of your cash inflows and outflows effectively. Having a good understanding of where you money is going allows you to make better decisions and plan your payments around your cash inflows. We recommend Xero, as it is cloud based, user-friendly and we can provide tailored advice and training to ensure you get the most out of your accounting package.

1. Create Cash flow forecasts

The forecast identifies who you are paying and when your payments are due, it will also allow you to identify when money is coming in. A good forecast will allow a margin to provide you with breathing room.

The forecast should be designed with a number of assumptions based on previous years or industry benchmarks. It should cover your sales, expenditure and future capital purchase.

1. Upfront Payments

To stabilise your cash flow and ensure you are getting paid, try collecting a deposit before you start the work or send the goods. Identify the risk and relationship with the client to determine how big the initial deposit should be. The deposit may be enough to cover the cost of sales allowing you to start the job and buy the relevant materials.

1. Schedule payments

At Leddys and Associates we offer fixed monthly accounting packages, to help you manage your cash flows and to spread out our cash inflows over the year. We highly recommend implementing scheduled payments or completion payments depending on your industry. This will help spread your cash inflows over the year and help you effectively budget.

These are just a few tips to help improve your cash flow, if you would like to sit down and develop a tailored solution for your business, we would love to hear from you. Contact us to see how we can help your business grow.