Cash Flow Tips – Managing cash flow in a small business – key areas to watch

A part of good business finance means managing cash flow in your small business and there are some key areas to watch. This requires knowledge, a good understanding and monitoring what?drives?the cash flow – both coming in AND going out!

The key areas of good cash flow management to watch are:

• Profitable income and increasing;
• Pricing for profit – if you’re able to increase prices, do it!
• Timely collection from customers – don’t be a bank for them;
• Stock management – enough to sell but not too much to tie up working capital;
• Good job management – finishing timely and with the best quality possible;
• Continual management and minimisation of costs and business overheads;
• Utilising all credit terms from suppliers and increasing where possible, eg extra time to pay.

The very best way to handle cash flow management is to have a ‘Cash Flow Projection’. This is software or a spread-sheet that plots out what your expected income will be (WHEN paid, ie taking into consideration the time customers are likely to take to pay) and what the expected outgoings (actually paid) will be. As well as income it includes any other funds coming into the business, such as asset sales, tax refunds etc. Outgoings will include items such as loan repayments, tax, dividends etc. These are just as important to take into account, as their timing can have a big impact on cash flow.

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