Businesses across Shropshire have been warned that cashflow difficulties could soon bring even the most successful company to its knees.
And DY’s Martyn Bramwell advises that failing to keep a close eye on how cash flows in and out of your business could be disastrous, particularly for small businesses.
“It may sound daunting, or something that only larger companies would need to worry about, but most small businesses will experience cashflow problems at some point in time.
“That’s why keeping money in the bank should help to ensure a healthy financial outlook for the entire year, keeping the cash flowing smoothly.”
Martyn said businesses should always prepare an estimate of income and expenditure to make it easy to compare projected sales and non-sales income against costs.
“This approach should help to protect your bank balance, which should alert you to any problems before they become too serious.
“Rent or broadband bills will remain fixed throughout the financial year, but energy costs may vary from season to season, so it’s worth factoring in these variations to create the most accurate cashflow forecast – and keep your projections pessimistic to provide a realistic outcome.”
Martyn said businesses should make sure all bases are covered by planning for three scenarios – take a best guess, then create one with 20% higher sales and another with 20% lower, to enable you to prepare a contingency plan if the worst should happen.
“Make sure you have the full details of all your customers too, including their exact name and legal status. And don’t be afraid to push for the information when you first start working with them, because if it’s difficult to obtain at the start, it will only be even more difficult later.
“Establish your payment terms too and only agree to begin work if a client agrees to your terms.
“Remember too that prompt payment can boost your cashflow and help your business to grow, so make sure your invoice contains all the details your client will need to pay on time – the easier you make it for them to pay, the more painless the process should be.
“Don’t be held to ransom by clients who are slow to pay up either – their payments could make all the difference to whether your business succeeds or fails, so stay on top of your finances at all times.
DY’s Martyn Bramwell, Tax and Small Business Manager