Accountants Stanmore, Middlesex HA7

Any successful small business will tell you that having a healthy cash flow is critical to the smooth running and growth of their business. That is why we, here at Stanmore Accountants would like to take a moment and explore why cash flow is so important to businesses and how firms can best manage it.

Beating the recession

These are not easy times for a business, no matter what size it is. The impact of the recession is manifesting itself by highlighting every weakness within a business. Recession is a time ot implement more effective procedures.

For small business there is nothing more obvious than focus on the steady cash flow. Cash flow is a movement of money inside a business. If neglected, poor cash flow management can cause business failures. According to the Department of Business 4,000 business failures in 2008 were caused by late payments. As well, over 50% of small business had reported as being affected by the late payments.

Some companies are taking this problem to their stride and are using a cash flow forecasting software. This type of computer program looks into the payment patters and can give estimates up to a year ahead. Another important role this software can have inside an enterprise is to spot the recurring patterns of late payments.

Following customer's habits

Most businesses have a set date in the month when they pay all their bills. You should enquirer with your customers when they themselves are doing this. That will enable to you to plan accordingly when you'll be paying your suppliers.

Regularly Update your invoices

Invoice all your customers as soon as it was agreed and keep an eye on any payments delays that might turn up. If the nature of your work requires longer projects, than agree monthly payments and make sure that you start the relationship with your customer with up-front deposit, that will pay for materials, stationery etc.

Run credit checks on your customers

Sometimes owners of the business feel urged to sell anything to anybody, especially when you are just starting in the business. But the most important thing is to ensure that whoever buys your products or services actually can pay for them.

Making a sale for sake of the sale might end up not being so good business. It would be much better if you do not waste resources and time providing for customers who never pay. When you invoice every customer, set up very clear expectations about when do you expect to be payed and which forms of money transfer do you expect, for example: cheque, BACS bank transfer etc.