A recent Regus study showed that 49% of UK professionals believe that managing cash flow is the largest challenge facing start-ups. Here, Richard Morris, UK CEO, Evans Easyspace, offers some tips to help you ensure your liquidity doesn’t dry out.
Plan plan plan
Make a 12-month action plan. While predicting profits is fun, a cash flow diary is more realistic – and the earnings will take care of themselves. Make it crystal clear when payments are due in all dealings with suppliers and clients.
Use online technologies to create a clear, streamlined cash flow. Take advantage of cloud-based accounting, so you can see your business details on-the-go. Go paperless with email invoices, creating an instant record and reducing the need for filing.
Engineer your income
Make payments into your accounts more predictable. If possible, use direct debits so you know the exact date you’ll be paid. Regus research shows that 72% of businesses dislike late invoice payments so much that they think legal penalties should be introduced to deter tardy clients. If you need to, adjust the clients you’re targeting. Reliable, fast-paying clients may make it easier for you to manage your cash flow than big-name but less regular partners.
Master your outgoings
Keeping attrition low is important when trying to manage your cash flow. While a payroll provider may seem pricey, by taking care of taxes and legal issues they could actually save you money.
For short-term gaps in cash flow, consider alternative funding. Many banks partner with businesses that specialise in providing invoice financing or trade supplier payments, allowing you the opportunity to bid for larger projects and take advantage of cash buyer discounts with suppliers.
Communication is key
When you’re tight on cash flow, an expected payment that doesn’t arrive causes serious issues. If you don’t inform your bank as soon as you hit troubled waters, they may freeze your credit, causing lasting damage to your supplier relationships. A quick phone call to your bank manager could prevent any trouble.
Apply this logic to all your stakeholders. Swift, clear communication is key – speak to clients, suppliers and creditors about potential payment problems before they happen, and you’ll make it much easier to manage your cash flow, giving your business the best chance of steering back into calmer waters.
By Richard Morris, CEO, Evans Easyspace, a provider of office space to rent for small to medium enterprise (SME) businesses, Evans Easyspace should be your first port of call for commercial leases as well as workshop rental.