With the UK set to be the only large economy to shrink in 2023, it’s safe to say that there’s a rocky road ahead for businesses.
Effective cash flow management can make or break a company’s success during hard economic periods. And cash reserves and forecasting can improve the chances of a new business surviving its first two years and beyond.
This blog will help you to better understand your cash position, so you can prepare and navigate the current economic turbulence.
Perform an accounts health check
To better understand your business’s cash flow, you need to look at your profit and loss statements. Poor cash management can lead to debts, and without long-term profits, most firms will fold.
By doing a thorough financial health assessment, you can identify how much cash you’ll need to meet your business goals.
Collect debts as soon as possible
When money is tight, customers and clients may not pay on time, which could affect your cash flow. Here are a few tips to avoid sitting on unpaid invoices:
- Request upfront deposits
- Penalise late payments
- Carry out credit checks where possible
- Set credit limits and payment terms
- Offer discounts on early payments to reward customer loyalty
Plan an annual budget
Fail to plan, plan to fail. It’s worth taking the time to strategically map out your budget for the year. With careful planning, you can project where you’ll spend and receive money over the next 12 months. And you can look at ways to boost profits during less busy periods.
Ultimately, budget planning means pre-empting downturns in your cash flow and steering your company in keeping with your cash position.
Develop a contingency strategy
While on the subject of planning, you might want to consider your options if your finances take a dip.
With a backup plan, you’ll put your business in a better – and more secure – position to cope in trickier times. Think about what a cash flow crisis would mean for your business and explore other realistic revenue streams in case your finances spiral.
Optimise tax relief
In a bid to assist business growth across the country, there are several tax relief opportunities, such as:
- Employment Allowance
- Research and Development (R&D)
- Business rates relief
Your accountant can help you to figure out if you’re eligible for any, and can get the ball rolling.
Modernise your cash flow with Nabarro Poole
Need support with your cash management? At Nabarro Poole, we use Cloud Accounting software to offer our clients tangible, personal accounting services with full visibility.
If you want to learn more about our accounting services, talk to our team today.