Managing small business finance can seem overwhelming. Full of buzzwords and banks trying their best to baffle you. But when your cash flow is in order, your profit will follow, and if you take it back to basics, managing cash flow is easier than you think.
The idea behind cash flow management is straightforward: speed up your cash inflows, while slowing down your cash outflows where possible and there are easy steps you do to make it happen.
Create a cash flow forecast and keep on top of it. There are loads of templates available online which will help you to understand when cash will come into your account and leave it.
Try if possible to forecast one year in advance, but the forecast will and should change and you should be monitoring it every week. Although you don’t have to account for every penny, it should include all sales, costs and cash transactions.
Once you’ve got this, you’ll be able to make smart decisions about your business, like whether you should recruit a member of staff or whether you should offer a new service.
Set payment terms from the offset
Make sure you communicate your payment terms clearly to your customers and suppliers. The earlier you can get customers to pay you, the better but 30 days is becoming a standard payment term. If you have good relationships with your suppliers, you could negotiate spreading payment over a longer period.
Offer incentives for early payment
Try giving your customers a discount for early payment to keep the cash coming in regularly.
Use technology to manage cash flow
You need to be able to access your account, arrange payments and monitor movement, on the go, whether you’re at the office or off site.
That means you’ll get real-time information about your income and outgoing streams and you can always make sure there are sufficient funds in the account. This is an important factor when choosing a business bank account option- take a look at our business current account, it’s designed to make it as easy as possible to manage business finances.
Minimise the gap between invoice and payment
Establishing direct debit as the normal system for payment will help reduce the gap between an invoice being sent and payment being received and makes cash flow much more stable.
Offer payment packages
Although this may only work for certain industries, giving customers the option to work on a retainer basis means that you’ll be paid up front instead of relying on an hourly rate post- work.
Down payments in advance of a project ensure that your customers fund the project, not you.
Make payments easier for customers
Make it easy and fast for customers to pay what they owe. People are used to making bank transfers using sort codes and account numbers and it’s the most common payment method.
Limit personal withdrawals
You’ve made the smart decision to keep your personal and business finance separate, so keep personal withdrawals from your business account to a minimum.
See, straightforward isn’t it? If you’re looking for a business current account that’s just as simple, you’re in the right place.With Arro Early Access, managing your finances is straightforward and it puts you in control of your finances, wherever you are. Get your Arro Early Access account now.