The small business guide to managing cash flow

As a small business, your cash flow can make or break your business.

In fact, according to research:

• Cash flow is the number one reason for business failure amongst start-ups
• 78% of all UK SMEs that are owed money are forced to wait at least one month beyond their agreement terms for payment
• 52% of small business owners have user personal savings or borrowed money to keep their business solvent
• 1 in 7 small business owners have been left unable to pay employees because of cash flow issues

We could go on. But it’s clear to see that cash flow is a huge issue for small businesses.

So how can you effectively manage your cash flow as a small business?

Ensure your books are accurate

The first step to keeping on top of your cash flow is understanding what you’re owed and who by. So make sure your accounting information is keep up to date and ensure its accurate, then you will easily be able to see your financial position.

Chase debtors

If you want to stay on top of your cash flow, it’s important to chase your debtors and encourage them to make payments promptly. This can be difficult as you won’t want to jeopardise the relationship, but they have a responsibility to pay you on time, particularly if you’re a small business.

So be direct and fair, and don’t be afraid to take action if you need to.

Build a cash reserve

Building a cash reserve will provide the cushion you need to face unexpected events without jeopardising your business. Not only this, but it will also give you the confidence you need to grow and expand your business.

Of course, it’s not always possible to build a significant cash reserve, particularly if you’re just starting out. But any reserves you can save will be beneficial.

Hire an accountant

Hiring an accounting will ensure that you always understand your financial position, while helping you to track payments received and invoices issued. Understanding when you are expecting payments, and when you will be required to make payments, will help you better forecast and plan your cashflow.

Why React Accountancy?

Here at React Accountancy, we provide trusted accountancy services to start-up, established and multi-national businesses across a diverse range of industries.

From the moment you get in touch, our approachable, friendly, and professional team will go above and beyond to ensure that you receive the right advice, support and accountancy solutions for your business.

All of our team has years of experience in providing accountancy services that support your business including complex financial issues.

Get in touch today for further information about any of our services.

You can reach us on 01914324110 or contact us via email using info@reactaccountancy.co.uk