Content Hub

Content Hub


Cash Flow Q&A for Small Firms


Why is Cash Flow so Important to Small Firms?

Cash flow is important to a business because it’s the lifeblood. The process of collecting and paying out cash, keeps the heart of the business functioning.

And just like the heart, get the timing wrong and it can be devastating.

With cash inflows and outflows largely consisting of accounts receivable and payable, the majority of the cash received and paid is a continuous risk cycle that many businesses experience month in, month out.

Control is key.

What can small firms do that will make a real difference?

Being clear about your own payment, collection and credit terms in advance of transaction can alleviate the issue almost completely. However, in an established business, with scale, this is often already past a manageable point. In that case, flattening order demand curves can relieve supply chain stress and avoid surplus capacity.

Note, this is often only achievable with the introduction of technology (and potentially handling agents) to start to make a positive difference very quickly.

How can small firms plan ahead so they don’t end up in difficulty?

As before, the key is to establish internal policy and process, part of which would be to find the technology and process that suits your way of functioning. Ideally it would be a solution that ensures your positive flow outweighs your negative flow, thus keeping the business healthy.

If you already have a large mix of clients with varying credit terms, you would do well to gain some advice from an expert business funding provider to check your current policy is functioning healthily. If you do that, look for one that can provide advice and technology as well as funds as this could enable a longer term solution to flattening order curves and speeding up payments into your business account. There is a cost but they’ll often give you a no obligation audit which is a great way to try before you buy.

How can small firms effectively track cash flow?

Spreadsheets are so yesterday. Accounting packages are readily available and come with easy to read and use dashboard facilities so that you can keep a close eye on the numbers daily.

Proactively managing your payment/collection process could mean almost by default you start to flatten payment spikes and feel less pressure and stress.

How can keeping on top of cash flow impact the bottom line and profit/loss?

The benefits are enormous: positive cash flow, consistent collections (before supplier payments are due) credit potentially extended and customers buying more from you and improved relationships because of it, often driving more sales and profit as a consequence.

Engaging a business funding expert could help fully evaluate how technology and innovation can assist and speed this up for your business.