You may wonder why your business is always strapped for cash when you see healthy revenues coming in. You suspect you have some expenses that could be reduced or cut altogether. But you honestly don’t know where to start.
What you need is someone who can provide accurate financial reports and help you evaluate opportunities to cut costs. It all starts with clear and accurate books.
With global uncertainty, recent high inflation, energy prices soaring, supply chain challenges, cash is likely to be tight over the coming year. Cloud technology and apps can give your business the best possible control over its cash.
Why is cashflow so important?
To keep your business operating, you need enough money coming into the business to cover your outgoings – with enough surplus cash to deliver a profit.
In recessionary periods consumers have less disposable income to spend on your products and services. Your business customers will be looking to reign in their spending. As a net result, your business may make fewer sales and bring in smaller revenues.
This means:
- Reduced income coming into the business.
- Less cash in the business to cover your operational expenses.
- Possibly not enough money in the bank to pay suppliers, utility providers or payroll costs.
- In the worst-case scenario, insufficient cashflow for you to continue trading.
What can you do to improve your cashflow situation?
The more informed you are about your cash position, the more you can do to increase your profits now, and prepare for any cashflow gaps. It’s this foresight that can make all the difference when you’re battling against tough external economic forces and a downturn in sales.
If you want to safeguard your cashflow, these are some sensible steps to take:
- Switch to cloud accounting – accounting and finance technology has moved on in leaps and bounds in the past decade. The best cloud accounting platforms all offer a detailed reporting of your cash position. These software tools will generally offer real-time data, giving you up to date cash numbers.
- Integrate with cashflow forecasting apps – cloud accounting platforms let you add third party apps to create a custom app stack of helpful business tools. There are plenty of cashflow forecasting apps to choose from, giving you the ability to predict your future cashflow position.
- Plan ahead for the cashflow gaps – when your forecast shows a shortfall of cash coming up, that’s the time to take evasive action. If you can see that there’s a cash hole approaching next month, it’s time to look at ways of raising extra finance to fill that hole. That could mean extending your bank overdraft, taking out a small business loan, or taking out an invoice finance facility (a type of financing where a business uses its unpaid invoices as collateral to secure a loan or line of credit).
- Look for opportunities to cut your overheads – one way to even up your cashflow is to cut down on your expenditure. If you can cut back on overheads, expenses and unnecessary costs, this can help you re-balance your cash position, even when cashflow is getting tight. Look for cheaper suppliers, buy in smaller quantities and take every opportunity to cut costs and keep your spending more sensible.
- Update your prices and your sales strategy – raising your prices is one way to bring in more cash, but it’s a balancing act. Increasing your prices can alienate existing customers and you could lose some, but if you can find the sweet spot for your pricing and also drum up more sales, you can quickly increase revenue and give your cash inflows a healthy boost.
- Review your cashflow reports regularly – it’s important to look at your cashflow numbers and reporting regularly, at least monthly. This is particularly important when economic times are tough. With the most current cash information on hand, you can make informed business decisions and aim to keep the business operational.
Talk to us about updating your cashflow processes
With your business in a healthy cashflow position, you give yourself some solid financial foundations for riding out the global recession. No business is invulnerable in these conditions, but with liquid cash in the business, you have more flexibility and more capital to play with.
We enjoy helping our clients gain clarity into their financial position, and we love to save our clients money. Book a meeting here and let’s see how we can improve your cashflow processes.
