How to Manage Cash Flow in Your Business

Staying on top of your business’s cash flow can seem like a tough task, with multiple payments going in and out that you need to monitor. But by understanding where your cash is coming from and going to, you can employ strategies to set your business up for success.

Our infographic has been put together to help you get to grips with the key concepts and aspects of cash flow. By taking these concepts and applying them to your business, you can start to understand your finances even more, which will stand you in good stead for the future.

Experian

How to manage Cash Flow in Your Business

A small business guide to cash management from Experian.

Payment terms

Set appropriate payment terms for your clients and suppliers. It can be useful to build in some breathing space by negotiating longer payment terms with your suppliers than the terms on which your customers pay you.

Credit score

Protect your company’s financial history by ensuring that all outgoings are paid on time. The better your credit score, the better the payment terms you can negotiate, which can be a huge benefit for cash flow.

Invoicing

Invoice quickly and collect efficiently to reduce the gap between invoicing and being paid. You may also want to check if your terms and conditions cover your legal right to make late payment interest charges on your invoices.

Credit insurance

Consider taking out insurance to protect yourself against non-payment by your customers due to insolvency. This reduces the risk of putting your company into debt, which can help your cash flow by making finance more readily available.

Be informed

Before agreeing to a new contract with a customer or supplier, it’s important you understand their credit rating and how it affects their ability to pay. That’s not to say you should avoid poor ratings, but ensure you have provisions in place to protect you.

What is cash flow

Simply put, cashflow is the balance of payments coming in to your business to those going out. Managing cashflow is the most important part of running a business, particularly for small and medium sized businesses.

Why is it important?

While the primary goal is to ensure your outgoings are constantly balanced by inflow, you need to be prepared for cash flow gaps and large or unexpected expenses. Carefully monitoring this movement is essential to long-term survival.

What is a credit score?

A credit score is a measure of how individuals or businesses are perceived by lenders or other businesses. A high score indicates a low financial risk, whereas a low score suggests that they are less financially stable, or more likely to default on payments.

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Something as simple as negotiating longer payment terms for your suppliers than those you use for your clients can make a big difference in your ability to manage your business’s cash flow.

The concepts outlined in the infographic above are not difficult to grasp, but they will take a bit of work to implement successfully. However, if you see these as investments into the future that will propel your business forward, the work that it will take to implement them suddenly becomes worthwhile.

By following the above guide, you’ll be in a much better position to keep the cash flowing in your business. See how company credit checks can help your business today – visit Experian for Business and start your free trial.

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