Tips from an accountant – How to project cash flow

We’re helping businesses discover their business potential and have a produced a free guide to managing your cash flow. Here Will from our Accountants’ Team shares his cash flow tips.
Download our free guide to cash flow

Whilst all small business owners have probably been asked to prepare a cash flow at some time in the course of their business, actively continuing to manage cash and working capital on an on-going basis can get forgotten about, especially in times of slowdown, in the pursuit of new sales and the belief that everyone will be happy as long as the accounts show a profit at the end of the year. Sage Accountant Partners are accredited by Sage to market, install and train people on Sage software. They offer an outstanding customer experience and are leaders in their field; you can find a Sage Accountant Partner using our online tool.

Manage your cash flow

There are a number of measures you can take to actively manage your cash position and the mix of working capital – debtors, stock and creditors that make up your day to day trading –  to help stretch the gap between receipts and payments in your favour and maximise the cash available to you.

Do unto others

The first is based on “do unto others…” credit check potential customers to make sure they are likely to be in a position to pay you, if they will be significant customers for you, ask to see their cash flow forecasts. Other people are asking you, so why not ask them? In fact if your customers will be relying on you for key supplies, they may want to see your cash flows, to make sure their supply will be uninterrupted before they use you.

Also look to set payment terms you are comfortable with, given your knowledge of your industry, the customer, and the value of their business too you.

Chase debts

Once you have set payment terms, implement them and chase debts. If the customer has signed up to terms of 30 days, remind them that its day 28 now and confirm that you will feature in their next payment run. If you do this regularly they will view this as business as usual, rather than a sign of desperation.

Love your accountant

Save a bit of love for your accountant too. As an independent source of advice, they can be invaluable in helping build cash flow models to best practice and in instilling rigour in helping you establish your working capital management metrics. This is their bread and butter and they might just have that extra understanding of local conditions or of your industry. One of the keys to success is to embed the process in your business as quickly as possible and with repeated experience of looking at such requirements; your accountant is well placed to help make cash management a success for you and the users of your cash and working capital management outputs.

Will Partington, Accountants’ Team