Why a Cash flow management plan is vital to the success of your small business

With so much financial pressure on small businesses it is imperative that you have a cash flow management plan in place to help you through these troubled economic times.

Late payments can be crippling in more ways than one. If the problem is not addressed by setting up a method of prevention in the first place, serious problems will ensue; problems that will affect the profitability of your business, because you will be spending valuable time and resources chasing money and losing interest. And more worryingly, these problems could lead to difficulties obtaining credit.

Prevention is better than cure; make sure you have clear terms of business that set out your payment terms, and ensure you enforce those terms. Take action to collect any debts promptly so that customers realise they cannot take liberties.

Ensure invoices are sent out regularly; don’t delay in sending them as soon as an order or job is completed.

Keep track of your invoicing and payments due: make sure you have a record of who to invoice and when and when their payment is due. Also, keep a record of how long individual customers take to pay so that next time you deal with them, you are ready to face any payment issues before problems arise.

And if you do not have the time to dedicate to managing a cash flow programme, outsource to a company that does. Your bookkeeper will certainly be able to help you put a plan in place and may even be able to manage the whole thing for you so that you can get on with running your business and concentrating on the work side of things, whilst someone else takes care of getting the most out of your business’ profitability.