Cash Flow Strategy
Cash Flow Strategy | Blog | Invicta Accounting LTD

To quote Richard Branson “Never take your eyes off the cash flow because it’s the lifeblood of the business”

In the article we break down your cash flow and discuss how best to stretch it to your advantage. In layman’s terms delay payment of creditors and collect as much outstanding debts as quickly as possible, sounds easier than it is in practice.

Below we break down stretching your cash flow:

1. Collecting outstanding debts as quickly and promptly as possible. Some people say they do not have time to chase their customers and this impacts a cash flow massively. Whilst it can be a time-consuming job it is critical, possibly investigate auto invoice software which will do chasers for you based on your terms of payment.                                                                                                                                                          

Another option is potentially offering early payment discounts to encourage customers to pay straight away.

Having strong credit control is key. Think of the ‘cash is king’ mantra that we have all come across, consider what it means. In a nutshell the cash is far better off in your pocket than someone else’s.

2. Breakdown your creditors into different categories of importance. Do not pay everything all at once and risk running short if your sales income does not arrive, spread it over the month.

Categories of importance

a.Need to pay – these are payments that if left unpaid could damage your business. Tax authorities, staff payroll, premises rent etc. 

b.Should pay – think of utility bills etc where you normally have a grace period from the invoice date. Do not stretch this to the point of getting cut off as that won’t look good on the business.                                                                                                        

3. As discussed previously relating to the current pandemic if you have any tax deferral schemes in place. Plan with the tax authorities to pay this off over time in small manageable installments. Do not wait till the deadline as this could cause strain on the business as you cannot be sure how your business will perform. We all hope it will outperform the previous year but take a pragmatic approach.                                                                          

4. Review how you pay things, this will take time at the start but in the long run will save you time. Consider early payment discounts (as mentioned in point 1 above), some suppliers will offer normal 28/30 day terms but if you pay within a shorter time frame you get money off.                                                                                                                                                                                                                                            

Direct debits can also be a way to save time and sometimes discounts are offered for these too. But before signing a direct debit you must have tight control over your cash flow otherwise you run the risk of incurring excessive fees for failed direct debits if the cash is not in the account to make the payment.

5. The final point is keeping the communication up with your suppliers, tax authorities and in some cases even your banking provider. All these entities are going to be more amenable to any special request you may have if you have fostered a positive relationship with them and kept them in the loop.

If you require any assistance throughout the current pandemic and in reviewing or implementing a cash flow strategy please contact us on any of our social media platforms or email us at info@invicta-accounting.com and we will arrange to contact you. We are offering free consultations to all businesses throughout this pandemic. Restrictions are beginning to lift, nonetheless we urge you to stay safe and respect the government mandated protocols.