Tips To Cashflow Success
Cashflow funding of a
business is key for its survival. A
number of businesses fail within their first two years of trading, not because
they didn’t have a good product or service, not because they didn’t have a market. They simply ran out of cash.
Businesses are struggling
more than ever to just stay afloat with increases on supplier costs, energy,
bank interest charges and national insurance changes. None of us know when things will improve,
but there are things we can do ourselves to make it a little easier to trade.
Tracking Sales Income
Prepare a detailed
cashflow of your normal business trading, information from Sales already in
your diary, if you have been trading for a few years. Use past history to project forward plus
inflation to increase sales, or a advertising campaign will potentially could increase
your turnover. For the new business set
an achievable goal. Always look ahead a
minimum of a year, three years if possible.
You may have peaks and
troughs, downtime or seasonality, build these into your forecast. Its an estimation at this stage, but the more
you do it, the more you can more accurately predict the pattern.
Don’t forget VAT if that
applies. Ideally shown it separately,
and offset the VAT on purchases. Your
sudden inflow of cash may belong to HMRC.
Your Costs
Main costs first
Materials
Wages
Rent
Travel etc.
At the bottom, how much do
you have in the bank to start off with.
Show the opening balance of the bank.
We always look at forecast
cashflows, ie a budgeted one along with an actual one. As the months pass by update the cashflow
with your actual figures and roll forward.
So that you are always looking at a year to date. Comparing predicted with actual you can look
into the reason why you made target, or why you didn’t. It makes for better decision making.
By now you will know ahead
of time your cashflow issues, peaks and troughs, you can now put a plan of
action to make sure that you are covered in the troughs, and are saving in the
peaks.
If you need a large amount
of cash in six months time. Don’t leave
the sudden influx of cash to the last minute.
Build up over a period of time. You
are more likely to fill the gap with what you need.
You might be wanting to
buy capital expenditure, or take on more staff to run a project, it will help
you predict when this can take place.
Look at your marketing to
increase sales. Check your margins to
make sure your sales cover your costs. The
latest budget changes was an estimated 5% change to everyone costs. Did you put that into your forecast.
Keep a close eye on the
costs themselves, are you spending money on something you don’t need, or can a
piece of equipment help you do it quicker and more efficiently.
Tracking everything, yes its time you may not even have. But if you get yourself into a routine, it just becomes part of your day to day.
Companies who track and
plan ahead tend to more frequently ride these storms more successfully, than
companies that don’t.
Don’t let the fact that you
may be a small company put you off. This
applies to you just like a large company.
Look at other options for finance other than your
cashflows from the business.
Put in family or your own
money. (MLR rules apply)
Gain credit from your
suppliers
Finance leases from the
banks and other money lenders
A credit card you pay off
every month
A mortgage
A business is like a plant. Its needs feeding from time to time, to see
it bear fruit.
Your credit score can even
affect you being able to take on a large contract. You will still need the credit from your
supplier to make that important sale.
By gaining credit it will
increase your credit score and make you more attractive to lenders.
Gaining credit and paying
it off on time increases your credit score and therefore your buying
power. you can easily track your
credit score online now so how its looking.
Definitely important if you are applying for a loan or mortgage.
Even if you only use a credit
card temporarily it can make all the difference.
We provide a simple
template to our clients who ask for one.
Its easy to use and clients have found it so helpful. Give it a go, you may find you get that goal
achieved in a short space of time.
Were certainly working on
ours for 2026.
