Top Tips for SME’s Managing Cash Flow During the Pandemic
With the lockdown beginning to ease, it is hoped that the UK economy will steadily return back to normal. However, the cash flow impacts are likely to remain for some time to come and as such it is important for any SME to be in control of its liquidity position during this period. In this article we cover off some easy to implement tips that will help any business successfully manage its cash position.
5 Important tips for effective cash management
Invoice promptly
Invoice clients as soon as work is completed.
Delaying will slow the time it takes for customer payments to be received and can also increase the likelihood of difficulty receiving funds later on. Sending invoices electronically is proven to be the best and fastest way to receive payment while also keeping a paper trail.
Analyse the cost base and reduce where possible
The cost base available for reduction will vary from business to business. Examples of savings which might be available include: cancelling unnecessary subscription payments, renegotiating interest on loan payments as well as reducing overheads where there is excess capacity. For example, if all office space is not being utilised – subletting space may be a way of reducing rent and utilities.
Leasing equipment instead of buying
Instead of tying up cash by buying computers, cars, and other business equipment, assets could be accessed via leasing.
Tax bill reduction and management
Legally minimising taxes payable should be a normal activity for any SME. It might be time to set up a meeting with an accountant which can help in this area. For example, R&D tax credits might be able to provide a much needed source of cash. HMRC have also offered concessions around timings for payment of VAT and PAYE/NI liabilities. A conversation with an accountant should inform you of the options available to your business.
Switch to online payments for customers
There a numerous inexpensive options to enable online payments for customers. The easier it is made for customers to pay, the better the cashflow impacts are likely to be for the business.
Cash flow modelling and forecasting
Depending on the complexities involved, a business may benefit from a cash flow forecast being built using a bespoke cash flow model. Such a model may prove especially useful where the business wants to run various scenarios about future performance. For example – if sales go up £100,000 and costs stay the same (with the same supplier terms) a cash flow model could project the cash impact of this on the business. Irregular timings around cash flows from using, for example, debt factoring, might also make cash flow modelling useful.
If you would like a commitment free chat to discuss cash flow management for your business, or any other finance, accounting and tax related matter, please call North Hill Chartered Accountants on tel: 020 8144 5399 or email: help@northhilluk.net .