4 cash flow habits to leave in 2019
As we start 2020 it’s a good time for businesses to look back at their performance in 2019 to identify their strengths and weaknesses.
This will provide the opportunity to adapt processes so that you can start the new year on the front foot.
One of the areas that many businesses could improve on is cash flow.
Yet, with so many things to concentrate on, it rarely makes the list of priorities.
No matter what your business does or industry you’re in, there are certain cash flow habits that we think would be better left in 2019.
Do you agree?
1. Failing to keep accurate records
When was the last time you updated your business’s financial information? If your records are up-to-date – great. If not, you could be doing your business a disservice.
Research shows that relying on outdated information results in lower levels of investment, less productivity and can stunt business growth.
Plus, accurate financial records are the key to spotting cash flow shortages in time to improve your financial position before it becomes an issue.
Download this guide to forecasting, planning and budgeting for tips on how to successfully manage your business finances.
2. Neglecting to save
Does your business have a contingency plan? If not, now is the time to put one in place.
Especially when it comes to cash flow, it’s important to know how you would overcome an unexpected late payment or business expense in order to protect your position.
If your business is lucky enough to have excess profits, it’s good practice to reserve some of this in a savings account so that you can cover unexpected payments or take advantage of new opportunities as they arise when you might otherwise not be able to.
For more tips on protecting your business read this post on developing a resilience plan.
3. Spending too much
Do you know exactly how much money is going out of your business at all times? Are you paying over the odds for products or services? Do you overspend on unnecessary items?
Whether you overspend out of recklessness or because you don’t have the time or resources to shop around, it can be dangerous to your cash flow.
Therefore, it’s important to regularly analyse your expenditure and benchmark your existing suppliers to reveal areas where you can make savings.
But remember that, whilst getting a cheaper deal could improve your cash flow, it’s important not to sacrifice quality as this could have a negative impact on your business.
Here are 5 key areas to look at to save your business money. Could you make any savings?
4. Waiting too long for payment
UK SMEs now wait an average of 23 days for late payments, according to a report by MarketFinance.
Not only is this negatively impacting cash flow it is also taking up valuable time and resources, with an Intuit QuickBooks report revealing that UK SMEs on average spend more than a week chasing after late payments. This amounts to over 56 million work hours a year.
There are a number of ways businesses can reduce their wait for payment.
Firstly, improving credit control processes can help prevent late payments and ensure that you have the right procedures in place to tackle it when it happens.
If you do not have the necessary internal resources you could benefit from outsourcing the task to the experts, who will use their extensive experience to deliver the best results for your business.
Alternatively, bespoke finance options are available which help businesses to overcome the cash flow challenges posed by trading on credit terms.
For example, invoice factoring combines the cash flow benefit of releasing working capital which is tied up in invoices with a dedicated sales ledger management service. This gives businesses the time and resources to meet day-to-day cash flow commitments without worrying about money coming in on time.
To find out more about invoice factoring, take a look at our absolute beginner’s guide to invoice finance.
As a commercial finance broker we can introduce the most suitable finance facility for your cash flow needs. Contact us today on 0800 9774833 or request a call back to see how we could help your business.
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