5 Essential Cash Flow Tips for Small Businesses

Let's talk money.

There are 101 priorities any small business owner must face, ranging from sales and marketing to staff and HR. But every element of running a successful business comes back to healthy cash flow.

Small business owner Caron Beesley got it right when she said, "Cash flow is the lifeblood of a business and critical in its growth." Indeed, UBC business centres accommodate hundreds of SMEs across the country, and we understand just how important it is for small businesses to maintain healthy cash flow for a successful, thriving future.

With this in mind, take a look at these 5 tips to help improve cash flow for your small business:

1) Drop everything and send that invoice:

Whether you invoice at the end of each calendar month or at the completion of a project, do it as soon as possible. Don't let other tasks take over because the longer you leave it, the longer you will wait for payment. Also, be wary of Bank Holidays and weekends when staff are out of the office. Always send invoices on a working day and where possible, try to fit in with your client’s payment run processes to speed things up.

2) Agree clear payment terms:

When discussing rates with clients, always agree on clear payment terms from the outset. Most agreements operate on a standard 30-day payment window, but be aware that some clients have longer terms (sometimes as much as 60 or 90 days). Such a delay - especially if you have staff and suppliers to pay - could seriously jeopardise your cash flow, which is why it's important to agree on terms before committing to the work.

3) Track invoices and jump on late payments:

Companies should track invoices and diarise when they expect to receive each payment, which gives you a clear line of sight over what's coming in throughout the month. It's good practice to send a friendly reminder a few days before the payment-due date, and it's essential to chase up late payments as quickly as possible.

If an overdue payment situation gets out of hand, you can claim interest and debt recovery costs if another business is late paying for goods or service. Read up on the official guidelines from Gov.uk here.

4) Ask for cash discounts where possible:

Jesse Torres, business advisor and contributor to the Money Talk radio programme, says there are various ways to ensure your business cash is "working hard". A sound cash-flow strategy includes timely payments, which means your business should not pay its bills ahead of time - or late - but exactly when they are due.

He adds: "To the extent that the organization is flush with cash, managers should ask for a cash discount at the time of a purchase instead of buying on credit. The offer of a cash payment may entice the seller to offer a discount. This can be especially beneficial in cases of big-ticket purchases where a discount can be meaningful."

5) Use technology to manage cash flow:

Most SMEs, particularly those with multiple expenses and a large client base, use software to manage their accounting and cash flow. Some smaller companies and independent firms prefer to manage their finances manually, often to save money on accounting software. The manual approach works well enough for some business owners, but if you're struggling to keep up with the financial side of your business - particularly if it's taking up valuable time - be sure to consider an automated approach.

Such tools can link directly to your bank account and take over tasks like invoicing, chasing clients for late payments, monitoring and reporting banking activity, and providing a dashboard for at-a-glance accounting. There are many options on the market for small businesses such as QuickBooks, Kash Flow and Free Agent, among others, and most offer a free trial too.

What other cash flow tips and tricks do you swear by? Let us know via Twitter or Facebook. If you're a small business owner with more useful advice, get in touch at marketing@ubcuk.com to share your advice via our blog and client newsletter.