Cash Flow Tips

1. Cash is your number one financial priority - put simply, if you run out of cash, your business will run out of life. Always remember this, and think about it every single day that you are trading.
   
2. Always know today's bank balance - ask yourself this question: "Do I know what my bank balance is today?" If the answer is no, you are not in control of your business, and you can't make sensible, informed or accurate business decisions.
   
3. Manage from your working capital - too many business owners manage from their monthly financial statements or bank balance and not from their working capital, which also takes into account money owed to them and money they owe. This is the most critical financial information you need to control your business, day to day.
   
4. Always project things ahead - as well as understanding today's cash position, make sure you have cash flow forecasts one month, three months or even six months ahead. If you do this, you'll have a much firmer grip on the management of your business.
   
5. Keep your cash under control - once you've got your cash flow under control, keep it there. Being in control of your cash all the time gives you the confidence and freedom to concentrate on other aspects of managing and growing your business.
   
6. Spot cash flow problems before they hit - if you can see a problem coming in time, you can do something about it. If you don't spot the problem before it hits, it will almost certainly be too late to rectify it. Cash flow problems rarely pop out of the blue. They will loom ahead, so be sure you see and deal with them in time.
   
7. Get someone to help you - most small business owners are pretty poor at recognising the importance of cash and cash flow management, never mind actually doing it. If this applies to you and you struggle to calculate your working capital accurately, ask us to help you.

Being in control of your cash flow at all times is critical to success and survival. There is no halfway house with this. Get it under control, or get someone to help you do it. Then you can spend more time on the aspects of running your business that you enjoy and are good at doing, which better reflects why you went into business in the first place.

For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.

Prime Chartered Accountants
Fact sheet published January 2007