1 – Start with good cash-flow forecasting

Create and maintain a weekly or monthly cash-flow forecast to help identify when you might struggle to pay your Start by listing your expected cash receipts and your planned expenses to calculate the net cash balance. If it’s negative, this will signify a time when you might find it harder to pay your bills.

2 – Plan for different scenarios

Scenario planning can provide insight into how your business might cope should costs fluctuate due to external factors in the global business community, or world events that you cannot control. A good place to start is to be planning for what would happen if your distribution or raw material costs went up unexpectedly for example.

3 – Consider your one-day cash flow value

Considering the value of just one day cashflow can help you think about the trade-off between cash flow and profit. Ask yourself what would happen if you could collect your receivables one day quicker, or pay your suppliers one day later. Answers to these types of questions could help you hold onto your cash for a little longer.

4 – Provide cash flow training for your team

Train those responsible for things like purchasing, stock management and Their input could result in you offering different payment terms to different customers based on sales volume or historical payment records, or running a promotional offer to sell a product that isn’t moving fast.

5 – Communicate effectively

Include all the relevant people in your communications about cash flow and ensure everyone takes part in regular forecast reviews. This will help your team become more realistic about sales, purchases, and stock levels for future forecasts, and understand that variances are expected.

6 – Make sure you get paid promptly

There are a number of things you can do to get paid sooner, including:

• Credit checking new customers before you take them on and if necessary, getting them to pay in advance.
• Issuing invoices promptly and chasing outstanding debts, focusing on customers who tend to pay late.
• Having a defined escalation process around late payments.
• Negotiate with customers to pay sooner in exchange for an early payment

7 – Manage with proper oversight

Managing your cash flow should be part of your regular monthly finance Your accounting system should be able to help you review things like overdue invoices, credit terms, which payments you owe and how overdue they are, as well as how much stock you are holding and how long it takes to sell a product. You can then calculate your cash conversion cycle based on these findings. If the average time that cash is tied up in your business is increasing for example, it’s usually time to consider making some changes to reduce the cycle.

8 – Control your stock and fixed assets

Reducing the amount of stock you hold, or reviewing your overheads could free up additional cash too. Implementing a ‘just- in-time’ approach to buying materials
for example could reduce costs such as inventory managers and warehousing, whereas negotiating a rent-free period from your landlord or improving the terms on your utilities and other overheads could also contribute.

Fixed assets used to generate income like property, plant, machinery, computers, equipment and vehicles can tie up lots of cash. Think about your planned capital expenditure – is it really necessary, or could you lease assets to generate positive cash flow?

 9 – Put the right finance options in place

If your business is seasonal or your cash flow is unsteady, you’ll need to think about the best ways of financing. Renegotiating your overdraft facility or taking out a loan may be options for you. Keeping a close eye on your cash flow means you can plan for potential periods of shortfall and get the best deals possible. You can also consider using any surplus cash more effectively, by putting it into interest-earning accounts to generate extra income. Talk to your bank to find the best finance options available.

For more start-up support visit: Lloydsbank.com/businessguides