Improving cash flow

It can often seem money is flowing out of your business as quickly as it pours in. Whether it is taxes, property costs, stock, materials or wages, improving cash flow is the art of collecting your receivables fast and controlling your expenditure.

Cash flow is simply the movement of money into and out of your business. You may be anticipating large profits in the next quarter, but if you don’t have enough money to cover your costs until then, you have a potentially serious cash flow problem.

The fundamentals

Creating and maintaining a solid cash flow often comes down to 3 fundamentals: the wider economy, getting money in faster and controlling your expenditure. While the first fundamental is largely out of individual businesses hands, the other 2 can be tweaked to maximise efficiency.

The balancing act here is that pushing either fundamental too far can be damaging to the relationships your business depends upon. Aggressively pursuing fast payment from customers and unfairly delaying the payment to suppliers are 2 sure fire ways to make people not want to do business with you.

The first stage is getting a handle on what position your business is currently in and where it is likely to be in the future. A rolling 12 month forecast, whereby things are mapped out on a weekly basis, will show you where the peaks and troughs are likely to be.

Money coming in

What is selling?

Which of your products or services sell the most regularly and turnover the quickest? You may have some big ticket items that only sell once in a while, which might be tying up money in an inventory that is not very productive.

Who is buying?

Segmenting your customers is an important way of knowing how money goes to your business. Who are your most important customers and what makes them so? It can often be the case that customers who generate a lot of revenue can also be expensive in terms of the resources used to service and maintain the relationship.

It could be that your key customers generate smaller revenue but demand less time, energy and resources to manage.

How are they paying?

Making the payment process as quick and painless as possible is a must if you want to free up your cashflow. Having a range of different payment methods available, including a clear 'due by' date on invoices and offering small discounts for early payments are some of the options open to you.

How are you collecting?

Creating a formal collections policy that ensures all customers are treated the same way is essential for reducing ad hoc responses to each late-paying customer. Lots of companies have a system of regular reminders that get more serious in tone the later they delay the payment. Increasing the level of communication you have with your clients could also be important.

Getting the debt collection agencies involved should always be a last resort due to the lasting damage they can inflict on customer relationships.

Money going out


If you have a core group of regular suppliers that you absolutely depend upon, and a satellite group of ones you use sporadically, you should be aiming to negotiate better terms and discounts with the core group.


Unused stock that is sat on your warehouse floor is essentially tying up money that could otherwise be improving your cash flow. By keeping track of your sales you can tailor your stock to reflect your sales patterns.

Another factor could be the disparity in delivery cost between different products. If 1 particular product is expensive and time-consuming to get hold of, it could be worth having a reserve.


You need to know exactly when you are due to make payments and how much you are going to have to pay. Many companies try and improve their cash flow by trying to legally delay their payments, but this can be damaging to business relations.

We can help you improve your cash flow and tighten up your internal processes. You can call us on 01375 383 888, fill in our contact form or email



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RM17 5RY

Tel: 01375 383888
Fax: 01375 391672