10 tips for keeping your cash flow healthy

Dan Martin
Former editor
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Tyrone Davies, chief financial officer at Creditsafe, gives his top tips on how to ensure your cash flow stays in the black. This article is part of the BusinessZone.co.uk Finance Masterclass.

With trade credit becoming the primary source of finance for small businesses over traditional lending avenues such as banks, small businesses must now be more adept at being able to manage their cash flow to ensure that suppliers are paid on time and your customers are paying within terms. However, what happens if your customer delays their payment to you? This could have a knock-on effect with your own payment responsibilities and in the long term your own creditworthiness.
As a CFO of a multi-national company, I've come across many different issues that can affect a business' cash flow, all of which can be a major problem for small businesses and start-ups. Here are ten tips on keeping your cash flow healthy:
  1. Forecast continually to anticipate cash ‘pinch points’ as early as possible
  2. Identify the key customer accounts and make sure there’s an open working relationship
  3. Identify your own 'flex' options for credit e.g. non-business critical suppliers or spreading payment terms
  4. Communication is key – engage with your bank and other finance partners early to avoid painful surprises – show them you know what’s going on with your cash flow and business as a whole
  5. Early payment discounts can provide one route to cash acceleration payments from customers
  6. Monitor customer creditworthiness to look for early warning signs of payment difficulty
  7. Consider finance alternatives e.g. invoice factoring
  8. Treat credit control as a key proactive element of your business
  9. Consider discounts or other offers for prospects, so your sales team can close a sale early
  10. Plan early and have protocols in place so you can pay and be paid
Having customer payment information at your fingertips definitely makes a difference, as it ensures that you can react should something change and it doesn’t always mean in a negative way. A cash-only customer may have an upturn in business, increasing their creditworthiness and therefore, you’re able to increase their credit facility and payment terms, which in turn leads to an increase in sales and revenue generated for your business. Surely that's a win-win situation? However, with good always comes bad, and if that reliable payer all of a sudden is hit with a CCJ or loss of business, you need to make sure that you have the right processes in place to deal with any fall-out of that change.
Doing something as simple as using a company credit report to monitor customers and suppliers can make all the difference to your cash flow because with knowledge comes the ability to make more informed business decisions. You’re able to anticipate changes in credit rating, see whether their payment history has changed (paying inside or out of agreed terms) and check on directors – you wouldn't want to be dealing with a 'phoenix director' as this could put your business at risk.
With the economy set to continue in its current form for the foreseeable future and a 4.7% increase in start ups in 2012 (there are now over 493,000), being able to keep our cash flow healthy and out of payment trouble will mean the difference between survival and growth, next to failure and starting again. 
For more expert advice on business finance, click here for the BusinessZone Finance Masterclass.

About Dan Martin

About Dan Martin

Dan Martin has 10 years experience as a journalist writing about entrepreneurs and the issues that affect them.

After three years working as a researcher for Sky News, he joined BusinessEurope.com as a reporter. This was followed by two years working as news editor for Startups.co.uk during which time Dan also contributed to Growing Business magazine. In 2006, he joined Sift Media as business editor before being promoted to editor of BusinessZone.co.uk. He also has responsibility for UK Business Forums, the UK’s most active online forums for small business entrepreneurs. In addition, Dan founded The Pitch, BusinessZone.co.uk's nationwide competition for small business owners. He host the grand finals in 2009 and 2010 in front of an audience of 300. 

As well as interviewing many entrepreneurs, Dan has written content for leading business organisations such as the Department for Business, Enterprise and Regulatory Reform, British Chambers of Commerce, Forum of Private Business, Investors in People and Business Link for London. Among the publications that have quoted Dan are The Times, Mail On Sunday, Financial Times, Personnel Today and Bristol Evening Post. His articles have also been published by publications including eGov Monitor, Virgin Express in-flight magazine and Personal Success.

Dan regularly speaks at events about small business and social media issues. Among the events he has presented at are the National Federation of Enterprise Agencies' annual conference, Learning Technologies, Publishing Expo and World of Learning. He has also chaired high profile debates featuring senior representatives from Business Link and the Federation of Small Businesses and Dragons' Den judge James Caan.

Dan was named the 10th most influential political blogger on Twitter by the Independent and won the public award for best B2B tweeter at the Golden Twits 2010. He also organised the Bristol Twestival, part of a global Twitter driven charity initiative, in February 2009 and March 2010. Volunteers from 175 cities around the world organised events using the social network. In total, $350,000 was raised for charity: water in 2009 and $500,000 for Concern in 2010. In Bristol, £1,500 and £5,600 was raised.


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