How to handle cash flow within your business

Published: 18/02/2020

Staying on top of your cash flow is business 101 - it’s the only way to know how much is coming in and how much is going out, and research shows cash flow issues are one of the main reasons businesses fail. 

Cash flow is commonly mistaken for profits when in reality businesses with healthy profits can find themselves filing for bankruptcy due to the amount coming in not matching the amount going out. 

We’re not here to panic you though, we’re here to help, and so we’ve put together a go-to guide on how to successfully handle cash flow within your business. Before we get stuck in let’s strip it right back to basics. 

What is cash flow?

In a nutshell, it’s the movement of money in and out of your business. You can have positive cash flow whereby the amount of cash entering your accounts through sales, payments, etc. is more than the amount leaving to pay expenses, salaries, etc. 

You can also have negative cash flow which is the reverse - the outflow is larger than the incoming money, and this is where businesses can find themselves in hot water. 

How do you avoid finding yourself in the red? By tracking your cash flow regularly - weekly, monthly, or at the very least quarterly. 

What’s the difference between profits and cash flow?

In order to run a profitable business, you need a positive cash flow. Why? Because to buy or produce products or services to sell, you need the funds to pay for the ingredients, stock, employees, etc. 

So, your cash flow is the backbone of your business, and what allows revenue to come in and profits to be made. Now let’s dive into how to manage cash flow like a pro. 

1. Monitor regularly

We’ve said it before and we’ll say it again because it’s the most critical aspect to nailing your cash flow. Keep a close eye on what’s coming in and what’s going out regularly and that way, you’ll be able to nip any issues in the bud before they cause problems. 

A nifty way to keep an eye on sales income is with technology. The software found in decent EPOS systems (spoiler, like ours) allows you to track your sales and stock from anywhere you’re connected to the internet, and will even send reports straight to your accountant (leaving you with one less thing to do, hooray!).

2. Cut costs

Boost your business’ cash flow quickly (great for situations where you find yourself short) by being diligent about your recurring expenses. You could take a look at:

  • Utilities like gas, electric, water, etc.
  • Services such as internet, phone, payment systems, etc.
  • Payroll i.e. do you need two people working a quiet shift or would one suffice?
  • Rent - are you overpaying?
  • Insurance - are you shelling out for insurance you no longer need?
  • Subscription services - do you actually use them?

If you can renegotiate contracts, switch providers, cut back on staff, and so on, you’ll have your cash flow looking perkier in no time. 

3. Look at your assets

As well as looking at your regular outgoings you can help your cash flow look healthier by selling assets you no longer need to generate some dosh. 

Do you have equipment you no longer use? Or stock that’s outdated or surplus to requirement? If so, think about selling it to spruce up your cash flow.

4. Consider leasing

When you’re next in the market for a new gadget, look at your options for leasing rather than forking out to own it outright. Leasing will save you money, but will also give you access to the latest features and updates, tech support, plus ongoing repairs and maintenance. 

Don’t forget: You can expense lease costs on your business taxes. 

5. Invoicing

If you’re not in a business that involves being paid on the spot (like a shop), invoicing effectively will keep your cash flow healthy and help you stay on top of things. Here are a few tips:

  • Design your invoices so they’re simple and easily understood by customers, and always include a date by which payment is required. 
  • If your services are long-term or involve a period of time before completion, ask for an upfront deposit and split the remaining costs over the duration of the works. 
  • Consider sending invoices by email using pay by link to speed up the process and add extra convenience for the customer.
  • If your work takes you on the road (i.e. mobile sales, hairdresser, taxi etc.) don’t be reliant on customers carrying cash and consider a mobile card machine instead. It’ll mean there’ll never be an excuse for delayed payment and might even open the door to additional sales. 

6. Get paid faster

Is there anything worse than waiting to get paid? It can be tedious and feel pretty painful when your accounts are in need of the injection. So, a handy way to avoid your cash flow creeping into the red is to adopt faster payments. 

Essentially, faster payments are a service offered by banks and payment providers (including us) that allow money to be paid pronto (typically immediately but at the very least within two hours). 

Sign yourself up to start accepting faster payments and keep your cash flow comfortably in the black.

7. Sell more

Duh, right? But if your cash flow isn’t looking too perky it’s important you sell more in a way that doesn’t set you back further. How? By selling to existing customers rather than spending money marketing to new ones. 

Selling more to the customers you already have costs less and can be done in two ways:

1. Analysis - Use technology to find out patterns in your customers’ behaviour - like the customer data provided by your EPOS system or the swathes of information available using Google Analytics - and use this to up your game and elicit further sales. 

2. Promotions & discounts - Incentivise customers to spend more by offering discounts and promotions and you’ll go some way to boosting your cash flow (albeit while slightly eating into your profits). If you offer services rather than goods you could adopt this methodology and offer a discount for early payment. 

Remember: Only do this if the pay-off is worthwhile. Sit down and crunch the numbers first to ensure the trade-off (i.e. discount, early repayment) is worth the loss (i.e. less cash overall).  

8. Delay payments

If you find yourself in a bit of a jam, your cash flow is lagging and you want a bit of breathing room to sort it out, try delaying your own payments. 

Get in touch with your vendors and find out when the latest you can pay is before incurring some form of penalty. Pushing back the date will keep the money in your account for as long as possible and give you time to rectify your cash flow situation. 

Here at takepayments, helping you get paid so your cash flow looks healthy is our bread and butter. Our EPOS till systems are the cream of the crop and provide live sales reports via a cloud system so you’ll never struggle to keep track of your cash flow again, no matter where you are. 

We’re also proud to offer the latest ways to accept payments including faster payments, mobile, pay by link and more, so you’ll never have to wait to get paid again. Better still, we won’t tie you down to a lengthy contract and offer tailor-made packages to suit every business. Chat with our friendly experts today on 08082 390206 to see what we can do for you.

Bryony Pearce

Bryony Pearce

Copywriter

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