One of the core reasons some start-ups and small businesses fail is a lack of capital. This is a trap any business owner is worried about falling into, so it can definitely help to get tips on how to avoid it. Nobody said starting an SME would be easy – but it can get easier if you follow our advice on how to manage your small business cash flow.
1. Hire an accountant
Employing a bookkeeper is a worthwhile investment, as it’s their job to get you out of a financial jam, and this gives you more time to grow your business. Even beyond financial advice, they will make sure your accounts are fully accurate and that not a single penny is missing.
2. Stockpile a cash reserve
It is nothing short of vital to be prepared for a rainy day, and a cash reserve can be a good way to insulate your business during rough times. This means fewer dividends to show for your hard work at first, but only because you are saving it – the money will still go towards you and your business, after all.
3. Keep your accounts separate
This might seem a bit obvious, but plenty of SMEs start out using the owner’s personal accounts for financing, but forgetting to correct this is easily done. To get the clearest picture of your capital, you will need to transfer all the relevant funds to a business account; this lets you know exactly how much your business is generating.
4. Send invoices quickly
To truly flourish, you need to understand invoicing – they must be easily comprehensible with a clear due date, with knowledge about whether you charge more for late payments. You could employ the opposite tactic too, providing discounts for any early payments. Automated invoicing is also always a compelling option.
5. Lease your equipment
Big start-up purchases can make a massive financial dent, preventing your business from taking off as best as it can. This can be alleviated by leasing your supplies and equipment, rather than buying, as it allows you to pay for it in predictable increments. This can do wonders for your ability to maintain a steady cash flow over time.
Small business cash flow – where to find out more
Read our article: 4 reasons why you should prioritise cash flow as a small business to learn more about cash flow management.
We offer finance solutions to help with small business cashflow – visit our knowledge hub to find out more.
Get in touch with us to find out how we can help your small business cash flow.