Effective cash flow management is a vital aspect of running a successful small business. Inadequate cash flow management is a leading cause of small business failure, with many entrepreneurs failing to prioritise this important task.

At MMG Chartered Accountants, we understand that managing your cash flow effectively is critical to the survival and growth of your business. Here are five top tips to help keep your small business thriving, and just some of our recommended software solutions that can help:

Keep Track of your Cash Flow

One of the most important things you can do to manage your cash flow effectively is to keep track of your cash inflows and outflows. Make sure to create a cash flow forecast, outlining when you expect to receive payments from customers and when you’ll need to pay suppliers and other expenses. This will help you anticipate any cash shortages and plan accordingly.

Top Tech Tip: Record an expense, send an invoice, understand your cashflow, stay on top of your tax. Take care of business, anytime and from anywhere with Xero, FreeAgent, Quickbooks

Negotiate Favourable Payment Terms

Negotiating favourable payment terms with suppliers and customers can help you manage your cash flow. Try to negotiate extended payment terms with your suppliers, so you can hold onto your cash for longer. At the same time, consider offering incentives to customers who pay early or on time, such as discounts or free delivery.

Top Tech Tip: Automate direct debit collections with Go Cardless and use Stripe, a payment platform to make transacting online easy. You may also consider Satago debtor management to keep track of what you’re owed.

Keep your Expenses Under Control

Controlling your expenses is crucial to maintaining healthy cash flow. Try to reduce your overhead costs where possible, such as rent, utilities, and insurance. Be sure to shop around for the best deals on supplies and equipment and consider leasing rather than buying to free up cash.

Top Tech Tip: Dext Prepare, formerly known as Receipt Bank, will collect, fetch, and categorise your business receipts.

Prepare for Emergencies

It’s essential to have a contingency plan in case of emergencies, such as unexpected expenses or a drop in sales. Make sure you have a cash reserve set aside to cover unexpected costs and consider taking out a line of credit or other financing options to help bridge any short-term cash gaps.

Top Tech Tip: Use Fluidly to forecast your cash position in the near future and model ‘what if’ scenarios to make informed decisions, and Futurli for jargon free predictions about your business performance using real-time data from your cloud accounting software to forecast the outcomes of your decisions.

Consider Outsourcing your Accounting and Bookkeeping

Outsourcing your accounting and bookkeeping can help you save time and money, freeing you up to focus on running your business. At MMG Chartered Accountants, we offer a range of accounting and bookkeeping services to help small businesses manage their finances effectively.

At MMG Chartered Accountants, we’re ‘relationship based, technology driven’ and our MMG123 approach finds the right solution for you. We use accounting technology to support you to grow your business by adding functionality and insights when the time is right, ensuring you get the right support when you need it. Accounting software can help businesses manage cash flow by providing real-time visibility into financials, automating processes such as invoicing and bill payments, and generating detailed financial reports.

It all starts with a conversation. Talk to us and find how effective cash flow management can help your business survive and thrive.