How I advise my clients about cash flow

For most small business owners cash flow is the absolute only thing they worry about when it comes to their finances. Advising can be tricky because it is not always black & white, and can be the life or death of a business – so no pressure! Here I explore what cash flow means for small businesses and how you can help your clients to navigate this minefield.

What is cash flow & why is it important?

When we talk about cash flow in this sense we mostly mean forecasting; business owners want to know what they can afford to spend on growing their business, and what cash they can take out to spend personally.

Cash flow is all about the….timing. It’s absolutely key to ensuring the longevity of a small business – if there’s no cash in the bank then employees might not get paid, suppliers won’t get paid on time, reputation suffers and essentially a business could fold.

What are the key principles of cash flow for small businesses?

1.        Accurate forecasting. Look at historical data, in particular the bank statements. Make a list of regular payments, check for dates in which large payments go out of the bank (HMRC, payroll) and ask your client to provide an up to date budget.

2.        Establish a buffer.  Having a cash buffer gives your client peace of mind. Suggest they put aside at least three months’ worth of essential expenses to avoid getting caught off guard. Tip – this can build gradually, Rome wasn’t built in a day. In the meantime, why not negotiate an overdraft with the bank or use a 0% credit card.

3.        Credit control. Streamline sales invoice processes, ensure that Aged Debtors are regularly checked and chased if overdue.

4.        Regularly review expenses. I try and sit down with clients every quarter to review their current expenses and to see if anything can be cut. Are there subscriptions they had forgotten about, or costs that can be negotiated down?

5.        Use Technology. There are several online programmes which can help with managing cash flow. My favourite is https://floatapp.com/ which has a free trial and integrates with Xero, Freeagent & Quickbooks.

6.        Last resort – financing options. Once tied into invoice discounting/factoring it can be difficult to get back to the point where it is not needed. Only as a last resort should this be considered. Tip – there is also a lot more admin involved with this option.

Conclusion

Managing cash flow is an ongoing process that requires consistent attention and adaptability. By following these key strategies, my clients have seen measurable improvements in their financial stability, resilience, and growth potential. If you're looking to strengthen your cash flow, start small, be consistent, and leverage all the tools available to keep your cash flow smooth and predictable