Cashflow is the lifeblood of any business. You’ve almost definitely heard that one before, but it’s a common saying because it’s true. While profits are important, it’s the flow of cash that keeps businesses running day to day.

Proper cashflow management is also what lets you take advantage of opportunities, access loans and put money aside for difficult times. Here are some effective strategies for managing cashflow that every small-business owner should consider.

Cashflow forecasts

Cashflow forecasts are vital tools for predicting cash needs over a specific period. Specifically, they help you anticipate when cash will enter your business and when it will leave it, allowing you to plan accordingly.

They’re based on your previous cashflow from previous periods, which will be particularly useful if you experience predictable trends – such as a busy summer or quiet January. The idea is that your past data is then used to predict your future cashflow.

The best forecasters will create multiple documents, each making certain assumptions. That way, you should be able to better prepare for whatever comes your way.

Maintain cash reserves

Creating a cash reserve can provide a safety net for your business to fall back on during lean times – and the past few years have taught everyone the importance of that.

You should aim to save a portion of your profits each month to build a reserve that can cover unexpected expenses or slow periods. Be consistent with the amount you set aside and have a goal in mind. A good rule of thumb is to save enough to cover three to six months’ worth of operating expenses.

This buffer will give you peace of mind and financial stability, allowing you to make decisions without the pressure of immediate cash needs.

Improve your invoice practices

Delayed payments can seriously harm your cashflow. It’s extremely unfair, but unfortunately increasingly common. But could you prompt customers to pay you on time?

Make sure to issue your invoices promptly and that they’re clear and easy to understand. If customers pay late by a week on average, then you may want to issue invoices at least a week earlier than you do already (if that’s possible).

You could also offer early payment discounts to encourage prompt payments. Above all, don’t be afraid to follow up on overdue invoices. A polite reminder can often go a long way.

Negotiate payment terms with suppliers

Negotiating with your suppliers might seem like a futile idea in some circumstances, but remember that just like you need to boost your cash inflows, they do too.

Reach out to them to find out if they offer early payment discounts or whether you can buy in bulk to save yourself some money (just don’t tie up your cash in so much stock your business is left with its hands tied!).

If you don’t have the cash to justify bulk purchases, you could also seek out other local businesses who use the same or similar suppliers and see whether they’ll place an order with you.

Manage your expenses

Managing your expenses is essential if you want to maintain a healthy cashflow. To do that, it’s critical that you record every expense as it occurs so that nothing is forgotten. Pay special attention to all the free trials you claim so you don’t end up paying hundreds of pounds for something you’re not going to use.

Again, get in touch with suppliers. They – or a competitor – may be able to offer a similar service or product for less.

Access extra finance

There is always the option of accessing extra finance, either a business debt or grant. For either, you’ll have to apply, which good cashflow forecasting and monitoring will assist you with.

You can find grants on the British Business Bank. If you apply for a debt, make sure that you will be able to pay it and any interest due back.

Get in touch with us to discuss a cashflow management strategy.