A consistent cash flow in and out of a business is a sign of a flourishing organisation, however it is normal to encounter some issues here and there. Getting the balance between paying your staff, suppliers, tax and operating costs can be tricky and can cause some strains on your cash flow.
This is a common obstacle faced by small businesses, with a recent study showing that three in five UK small businesses experience cash flow problems. To manage your business’s cash flow, you may need to spend money to make more of it by investing in new technology and systems to streamline cash flow problems.
Record keeping
Keeping accurate and up-to-date records is critical to the efficiency of business processes. Effective financial reporting ensures that you know exactly what your finances look like 100 percent of the time and that your assets and liabilities are accurate, itemised and balanced.
This has never been more essential than with more and more employees working remotely across the UK. Staff may be accessing information from different locations and times, so all records need to be detailed and updated.
Automate processes
Automating routine processes can reduce money spent on correcting human error and allow employees to complete more meaningful tasks. Introducing systems such as data entry and payroll software can improve productivity across your organisation.
Companies can hand off tedious tasks to machines without using too many valuable resources and increase their profitability. This allows workforces to spend more time focusing on activities that add value to their clients and customers.
Review financing
The future is unpredictable and there is no guarantee that you won’t hit difficulties so reviewing your financing regularly will ensure that your business can survive cash shortfalls. This is particularly helpful when looking to expand your operations or purchase new equipment. Understanding how you finance your business will help you make the most out of your money.
Useful ways of getting working capital for your business include bank loans, lines of credit, investors and invoice factoring. These methods can be practical in many scenarios, from customers being slow in paying their bills to using unpaid invoices to secure a loan.
Focus on inventory management and renting
When it comes to big purchases such as vehicles and equipment, you can keep better control of your cash flow by avoiding buying them outright. Instead of shelling out for a big expense, you can trade your equipment in for newer models and dodge the worry and admin of selling it.
Other inventory management will prevent cash from being tied up in stock and storage. Consider implementing a ‘first in, first out’ rule to minimise the loss of perishable stock and unnecessary purchases.
Summary
Maintaining a steady cash flow is crucial for business success, but challenges are common. Small businesses often face cash flow issues, with three in five UK enterprises affected. Efficient record-keeping, especially with remote work, is vital. Automating processes, like payroll, minimizes errors and boosts productivity. Regularly reviewing financing ensures survival during cash shortfalls. Utilizing working capital sources such as bank loans and invoice factoring proves practical. For large purchases, focus on inventory management and consider renting to optimize cash flow.
