With the latest lockdown measures across England, it’s a turbulent time for small businesses. We’re now faced with new and unexpected challenges we need to adapt to in order to thrive. The latest restrictions have thrown us into another few weeks of crisis and uncertainty, but let’s use this time to adapt, take stock and fix the leaks and cracks in our businesses before they get the better of us.
These challenges also create uncertainty around cash flow. The unpredictability of the coming weeks and months makes it difficult to predict your future cash position and the impact lockdown might have on your cash flow. That’s why we need to stay on the front foot, be proactive and make cash flow a priority.
Cash flow is like the beating heart of your organisation–– it’s integral to the health and future success of your business. Around 80-90% of small businesses fail because of bad cash flow, but this can be avoided with smarter spending and better financial planning. Good cash flow management can be the difference between surviving and thriving as a business.
Here are some great ways to help you better manage your cash flow, so you can adapt and thrive even in the most challenging times.
Tighten up the systems
To ensure a steady and predictable cash flow, you need reliable and sturdy systems in place. Do you have a really strong accounting and bookkeeping setup? Whilst bookkeeping might seem like a tedious task–especially with so many other things to focus on as a business owner– it’s the little things that add up to create bigger problems.
Sloppy bookkeeping and poorly organised systems can all be killers for your cash flow. Human error and mistakes in bookkeeping often result in a lot of wasted time. Smaller mistakes can often go unnoticed by you or your accountant, ruining the accuracy of your financials and skewing your cash flow reports. The anwer? Automation! Keep your accounting software up-to-date and automate bookkeeping and expenses where you can. That way, you’ll always have an accurate, clear and up-to-date picture of your current and future cash positions.
Looking to streamline your systems? Here’s 7 great apps to help you manage cash flow.
Assess your revenue streams
A great way to ensure a steady stream of cash is to review your revenue streams. Could you create a new revenue stream? Perhaps you could generate passive income by creating a course or an ebook for customers to purchase online?
How could you innovate your product or service to improve current revenue streams? Consider if there are any additional services or support you could be offering your customers that you’re not currently.
If it’s not feasible to design a new revenue stream, you could think about tweaking your pricing model instead. Could you price your products or services differently in order to generate more revenue? Consider what value your costumes are paying for and whether they’d be willing to pay more for the value you provide them.
Good cash flow management involves more than just being good with numbers, it’s about smarts and strategy. Be strategic about your business operations and look for areas of your business model that might not be working so well, then think of ways you could innovate them to boost cash flow.
Could you introduce any special offers or promotions during lockdown to help drive sales? Could you improve your social media and content strategies to boost sales? Does your website content clearly explain what value you can provide to potential clients?
Whilst lockdown might mean a lull in sales for most businesses, it could also mean a spike in sales and workload for others. Consider the additional demands being placed on your own business during lockdown. Do you have enough staff to cover the workload during busy periods? Are there any key partners you could call on to help manage your workload? Taking the time to reflect on your biggest problem areas will help you strategically plan for the weeks ahead.
Streamline the way you invoice and collect payments
Use software to manage cash gaps and create a more stable, monthly cash flow. If you have recurring customers, consider collecting payments automatically by direct debit. Auto-chasing invoices and sending invoices out automatically to regular customers can also help to shorten the gap between sending invoices and getting paid.
2020 has been a challenging year in so many ways, but it’s also made us more resilient and adaptable as business owners. With enough forward-planning, the right tools and some solid processes, you’ll have the best chances of navigating the coming weeks and months, whatever comes your way.
Talk to your accountant
Whilst good daily habits can really help to improve your cash flow, a great cash flow strategy also requires a solid understanding of the numbers. That’s why it’s so important to have a good accountant who can help you make cash flow a priority.
A proactive accountant will work with you to develop a foolproof cash flow strategy. They’ll use leading software to help you visualise your cash position with both long-term and short-term forecasts, helping you plan for multiple ‘what if?’ scenarios.
Need help managing your cash flow?
We know lockdown is a stressful and uncertain time for business owners, and it’s our mission to help you navigate the coming weeks and months so you can come out the other side stronger. We can support you with advice and strategy around finance and cash flow planning, and we can introduce you to some great pieces of software to help you automate the process as much as possible.
By being proactive and tackling problems head-on, we can successfully adapt to whatever comes our way.
Want to find out more? Just get in touch and we’d be happy to help!