Cash flow management – how not to run out of liquidity

For any business of any size and at any stage of its development. There is absolutely no doubt that effective and efficient cash flow managementCash Flow Management is fundamental to business success. However, despite its importance, some businesses still struggle to get the basics right.

Research has shown that 49 percent of start-ups think that cash flow is the largest challenge they face. (Source: Regus). So here are some tips to help ensure your liquidity doesn’t dry out.

Set Cash Flow Management Targets

To maintain a healthy cash flow you should have a clear picture of all your incomings and outgoings at all times. One way of controlling it is by preparing and maintaining a cash flow forecast. This should be updated weekly, to provide an accurate outlook for the next six to 12 months.

By keeping your cash flow forecast up to date, you will always be aware of any upcoming shortfalls and be able to take measures to protect your position.

Credit Control

Have clear credit control procedures in place to ensure a consistent approach to credit control which will improve cash flow and efficiency

Invoice Quickly and Accurately

Be sure to invoice as soon as possible so that the credit period can commence immediately and limit delays in payment. Any delays on your behalf will generally lead to delays from the client, particularly if the customer has arduous internal processes.

Control Your Own Income

Take charge of the timing of cash coming into your business by requesting payments by Direct Debit.  This way you will know when customers will be paying you.  This will allow you to forecast and plan more accurately.

Chase Late Payments as Soon as They Become Overdue

Statistically, the older an invoice gets the harder it becomes to collect. So, always chase your customers immediately. Their failure to pay might be a simple mistake or it could expose a deeper issue which may require immediate action to protect your cash flow.

Regularly Review Your Sales Ledger

In order to successfully manage cash flow it is essential to know when your customers are approaching and missing payment deadlines.  By regularly reviewing your Sales Ledger you can send reminders or chasing emails and letters quickly to reduce delays in payment.

Analyse Your Performance

Analysing your performance is key to finding where you can make improvements. For example, if you are commonly being paid late, you can take proactive steps to improve your credit control, or perhaps look into outsourcing this function to credit control experts.

Utilise Technology

Utilising new technologies can significantly reduce the amount of time it takes to perform some of the above tasks.  Take advantage of cloud-based accounting, so you can see your business details on-the-go. Go paperless with email invoices, creating an instant record and reducing the need for filing. By automating your processes and using better software you can manage your processes more effectively and often improve your results.


Clear and regular communication with customers, suppliers and your bank is crucial. Trading on credit terms can be risky so it’s important to get to know your customers in order to protect your cash flow. Equally, keeping the bank informed over any unforeseen outgoings and changes in forecasts is crucial.  When you’re tight on cash flow, an expected payment that doesn’t arrive can cause serious issues. Swift, clear communication is key – speak to clients, suppliers and creditors about potential payment problems before they happen, and you’ll give your business the best chance of succeeding.


It’s always a good idea to have an overdraft facility to fall back on.  Then if a customer fails to pay an invoice on time you have always got that to draw down on if needs be.  Any charges from the bank are deductible for tax purposes.

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Jason Scholey