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Interactive Diagnostic

Stratford-upon-Avon

13 The Courtyard
Timothy's Bridge Road
Stratford-Upon-Avon
Warwickshire CV37 9NP

01789 294484

enquiries@gjassociates.co.uk

London

7-8 Stratford Place
Mayfair
London
W1C 1AY

0207 495 0304

enquiries@gjassociates.co.uk

A healthy cash flow is critical to running a business, even more so in a cash-crunch economy. We share tips to help you improve your cash flow and stay profitable during tough times. 

A positive cash flow will help your company grow and see you through low sales. Whether your business is a start-up, growing, stable, or you want to exit, you must have substantial working capital.

It is critical to understand how much money is coming in and going out of the business to make any necessary adjustments. When you can project your cash flow accurately, you can make sound business decisions and steer your company in the right direction.  

At Grenfell James, we help businesses to feel financially confident. Talking to your Accountant often can help you manage and prevent cash flow difficulties.

Ten ways to a positive cash flow

#1 Increase your pricing 

The cost of living is increasing, which means your company expenses are increasing too. During periods of market volatility, you want to ensure you raise your prices to offset the change in running costs. Doing so will ensure you keep a healthy cash flow. Reviewing your pricing should be a staple part of your business process, giving you a competitive advantage whilst improving your cash flow.  

#2 Prepare cash flow forecasts 

Regular analyses will help you learn how much cash is coming in and going out of your business. A cash flow forecast is a great tool to measure if you’re on track to meet your business growth targets. Knowing how much money you will receive or spend, you can decide on the most helpful areas to invest in to realise your goals.  

#3 Make your payment terms work for you 

Most businesses in the UK have a 30-day payment terms policy. However, if you are a start-up or small business, consider using shorter payment terms to encourage quicker payments. You can also introduce an upfront payment or deposits to get your clients to pay for part or the whole service in advance. Shorter payment terms speed up money coming in, improving the cash flow of your business.  

#4 Issue invoices promptly 

Invoicing should be a top priority for any business. Getting your invoices out as soon as work is complete will help your cash flow and support your professional reputation. Many large organisations issue payments periodically in cycles. Delaying your invoice may cause you to miss a cycle and significantly affect your cash flow. 

#5 Use a cloud-based accounting software 

Investing in a digital accounting solution like Xero can significantly help you improve your payment times. Tools such as Xero enable you to keep all your finances under one roof, giving you complete control and visibility on pending invoices and bills needing payment in real-time. With Xero, you can raise and send invoices and automatically reconcile transactions with your bank account. Plus, there is a Xero feature for invoice reminders. Automating overdue payment reminders makes the tracking and chasing of owed money a lot easier and less awkward. 

#6 Make it easy for clients to pay you 

Paying your invoices should be easy for your clients, so make the process as simple as possible. Ensure your invoices are easy to read and include all the available payment options. Ask your clients what payment method works best for them, and be flexible.

If you sell products, customers may want to pay by credit or debit card. If you are a service-based company, clients may pay for regular work on a retainer basis, splitting the total cost into equal monthly payments. Online accounting software like Xero can be linked to digital payment services, such as GoCardless, Stripe or iwocaPay, to manage online payments flexibly. Once your Xero account is attached to a payment service, you can add a ‘pay now’ button to your invoices and encourage your clients to pay you immediately.  

#7 Make cash flow your focus when evaluating your profit margins 

Another often overlooked reason for cash flow problems is low-profit margins. Many businesses lower their prices during quiet periods to compensate for slow sales. Reducing your prices can be more damaging overall because it reduces the amount of money available in your pocket to pay your bills. A healthy profit margin will allow you to easily cover your company’s expenses and keep enough money in the bank to cover anything unexpected that may crop up. 

#8 Extend supplier payment terms 

When cash is tight, and you’re looking at ways to improve your working capital, you can ask your suppliers if they would be willing to extend their current terms. For example, if you’re due to pay your invoices in 30-days, perhaps you can negotiate 60- or 90-day terms to boost your cash flow. 

#9 Apply for a business loan 

If required, weigh the benefits of securing a business loan, often more affordable than a business overdraft or credit card. A business loan can boost your cash flow, pay business expenses, help with payroll, manage uncertainty, grow your business and cover revenue gaps. Before taking out a loan, you should consider: talking to a finance professional, being clear about your loan purpose, calculating how much you need and how much it will cost you to borrow the money you want and exploring your lending options. 

#10 Build up a cash flow reserve 

A cash reserve encompasses all the ‘liquid’ assets (i.e., cash and money market funds) your company keeps on hand to account for emergencies. Building a healthy cash flow reserve will ensure you don’t run out of cash in various scenarios, such as covering unexpected payments or your taxes, helping you sustain the business’s operations during quieter periods. Although a cash flow reserve can often be difficult to accumulate, it will provide your business with a safety net. 

Overall, having a good grasp of your company’s cash situation is crucial to surviving as a business.  

Are you interested in learning more about managing your cash flow or receiving our free cash flow forecast template? Get in touch at 01789 294484.

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    Grenfell James Technology Adoption Index

    How does your business perform against others adopting financial tech? Find out with our interactive diagnostic:

    1.

    How does your business receive invoices?

    A)

    Invoices are mainly received in paper form

    B)

    Invoices are mainly received by email

    C)

    Invoices are emailed then automatically forwarded to a designated mailbox

    2.

    How are purchase invoices processed?

    A)

    Invoices are entered manually

    B)

    Invoices are attached to manually raised invoices

    C)

    Automated software (e.g. ReceiptBank, 1Tap, HubDoc etc) collates invoices

    3.

    How are accounts processed?

    A)

    Using Excel/paper-based

    B)

    Using Computer-based, offline software

    C)

    Using cloud-based accountancy software

    4.

    How often is business data revised?

    A)

    Data is updated annually

    B)

    Data is updated quarterly

    C)

    Data is updated monthly or more often

    5.

    How is banking updated for your business?

    A)

    Banking is updated manually

    B)

    Banking is updated by imports

    C)

    Banking is updated via a live feed

    6.

    How are bank payments made?

    A)

    Bank payments are manual

    B)

    Bank payments are made using bulk imports

    C)

    Bank payments are made directly via accounting software

    7.

    How are bank receipts reconciled?

    A)

    Receipts are chased and reconciled manually

    B)

    Receipts are chased and reconciled automatically

    C)

    A third-party platform is used to chase debts and collect fees

    8.

    How often are management reports produced?

    A)

    No reports are provided

    B)

    Reports are provided but often too late to be valuable

    C)

    Reports are automated with real-time information

    Score 8-12:

    Curious Exploration

    Your financial technology phase is Curious Exploration

    % of respondent businesses are in this phase too.

    Switching accountancy systems may seem like an upheaval, but can be much more straightforward than most businesses imagine. From talking to our clients, they have found moving from paper invoicing and desktop-based accounting software to the cloud and apps quickly makes the transition process a worthwhile investment of time. Digital accounting solutions bring in streamlined processes, up-to-date business data and greater confidence in the accuracy of information when making financial decisions.

    Grenfell James works with your team to fully assess the needs of your business and minimise the impact of any transitions for solutions we recommend.

    Find out more about App Advisory

    More

    Score 13-19:

    Measured Discovery

    Your financial technology phase is Measured Discovery

    % of respondent businesses are in this phase too.

    Once cloud accountancy software is in place, there’s still plenty of scope to improve your accountancy processes and make sure your business is maximising the benefits of adopting a digital accounting solution. Grenfell James assesses each business to understand how any implemented solutions are being used, identify areas for improvement and the needs of the business overall to support your business goals and achieve success.

    Our team of experts can discuss a range of time-saving automation and get different apps and cloud-based solutions talking to create and manage a digital accountancy eco-system to help your business grow.

    Find out more about App Advisory

    More

    Score 20-24:

    Bold Innovation

    Your financial technology phase is Bold Innovation

    % of respondent businesses are in this phase too.

    You know the benefits of accounting technology and the impact it can have on your business goals. If you want to take it a step further, our team can conduct a systematic review of your processes, apps and business goals to ensure your digital accountancy ecosystem is keeping pace with the changing needs of a growing business.