Controlling Your Cash Flow:
💰 Controlling Your Cash Flow: A Key to Business Stability
One of the most common reasons businesses struggle isn't lack of sales—it's poor cash flow management. Without a clear understanding of where your money is coming from and where it's going, even profitable companies can face liquidity issues.
Here are three practical steps to take control of your cash flow:
1️⃣ Forecast Regularly
Create rolling cash flow forecasts to anticipate income and expenses. This helps you spot potential shortfalls before they become a problem.
2️⃣ Tighten Payment Cycles
Encourage clients to pay promptly and negotiate favourable terms with suppliers. Consider offering small discounts for early payments.
3️⃣ Monitor and Adjust
Review your cash flow weekly. Track what's working, identify patterns and adjust your spending or invoicing habits accordingly.
Strong cash flow is the lifeblood of any business. Master it, and you give your company the stability to grow with confidence.
In this digital age though, there are lessons to be learned from our grandparents. There are three principles that my grandparents used to manage their household budget and those same three principles a valid in business today.
1. Separation
Your bank balance lies to you.
That £40,000 looks like available cash. But £14,000 is tax. £8,000 is VAT
You don't have £40,000. You have £18,000
Without separation, you'll spend money that was never yours to spend - and scramble to meet the aged debtors or other bills.
2. Friction
Money that's easy to reach gets spent.
My grandparents knew this. They put the rent money in a separate tin so it couldn't accidentally become a night at the pub money.
The modern version?
Keep your tax and savings accounts separate to your trading account. By adding additional layers, you'll have to transfer that money to spend it, a hesitation point is created. You need to think before you spend.
Without friction, willpower is all you've got. And willpower runs out.
3. Visibility
You need to see the truth, not the comfortable number.
One account shows you £40,000 of possibility. Three accounts show you £18,000 of reality.
Without visibility, every decision is based on a number that doesn't exist.
The fix is simple. Three accounts:
Current account - your actual operating money
Taxes - PAYE, VAT and Corporation Tax provisions
Savings - for equipment, emergencies, or opportunities