Cash flow Bury St Edmunds, Ipswich and Thetford

What is cash flow?

This is the term used to describe the money that comes into and out of a business, typically over a given period, such as a month. This includes cash coming in from customers and money spent on expenses.

Why is cash flow so important?

Cash flow is not only an indicator of financial performance but is also widely seen as the key indicator of a company’s broader financial health. If cash were to run out then a business cannot operate.

In fact, negative cash flow is one of the most common reasons for insolvency and business failure.

Conversely, businesses in Bury St Edmunds, Ipswich and Thetford with a cash surplus can use those funds to finance innovation, new products or services or other investments that may help a business to grow.

How can I monitor cash flow in my business?

To monitor the cash that is flowing through a business you need to conduct regular cash flow forecasts. It is recommended, that as a minimum, businesses should have forecasts covering the next 30, 60 and 90-day periods. This can help businesses in Bury St Edmunds/ Thetford spot potential issues.

How do I produce a cash flow forecast?

To produce a forecast, a business should list the amount of cash coming into the businesses in income. Usually, most businesses start with a sales forecast for the period and then add additional income from other sources.

Businesses then need to figure out the cash leaving the business (outgoings), which includes expenses and all other costs incurred during trading, such as salaries and any outstanding finance.

Once you have these figures you simply take away your net outgoings from your net income. That will give you either a positive or a negative cash flow figure.

How can technology help me create a cash flow forecast?

Many of the modern online accounting systems can quickly and easily – with the assistance of a trained professional – produce accurate forecasts, as well as more detailed management reports.

Connected via the cloud to sales records and other financial documents, this software can do much of the work for you.

How can I manage my cash flow in my business?

There are three key elements involved in managing healthy cash flow:

• Control stock – If you are holding on to too many goods then you may be tying up cash for investment. By estimating your needs better, you can reduce overspend and tied up assets.
• Reduce costs – Cost management strategies can help to reduce outgoings and could include managing energy costs, re-evaluating and negotiating rents or reducing the amount spent on salaries and other benefits.
• Collect late payments – Late payments are a blight for many businesses, which is why businesses must have effective credit control processes and collection schedules in place.

Other elements, such as improving sales, cannot always be controlled, so businesses in Bury St Edmunds, Ipswich and Thetford with cash flow issues should address these first.

Why is credit control important to help manage cash flow?

Credit control ensures all receivables are paid on time. If you do not get paid on time then you may not be able to cover your business costs.

It can be challenging to chase clients and customers for payment, but it is essential. There are a growing number of software packages available to assist businesses with this, which can produce automated reminders and message for late payers.

In extreme cases, it may be worth ending unprofitable relationships so cash flow isn’t affected over the long term.

Can I use finance to manage cash flow?

There are various types of creditor finance that businesses in Bury St Edmunds/ Thetford can use, such as invoice financing, which provide temporary businesses that are struggling.

These can be useful, but like with any lending, caution must be taken to not become heavily indebted.

I need assistance with cash flow, how can Knight’s Lowe help?

If you need assistance with cash flow issues our team in Bury St Edmunds/ Thetford can help advise you on the steps you need to take to monitor and take control of your cash position.