Mastering cash flow, the strategies to keep a business financially healthy

Cash flow is the lifeblood of any business. Even profitable companies can face financial challenges if cash flow isn’t managed effectively. In fact, poor cash flow is one of the primary reasons SME’s struggle to grow.

Mastering cash flow isn’t just about ensuring bills are paid on time; it’s about creating a sustainable financial structure that supports long-term business health and growth. There are several practical strategies that can be deployed to keep a business financially healthy.

1. Forecast cash flow

A detailed cash flow forecast helps to anticipate periods of surplus or shortfall. This involves tracking all incoming and outgoing cash to predict a financial position in the months ahead.

Our advice – Regularly update cash flow forecast to reflect changes in market conditions, customer behaviour, or unexpected costs.

Using business finance – A revolving credit facility can provide peace of mind when cash flow forecasts reveal potential gaps. This ensures quick access to funds when they are most needed.

2. Shorten the receivables cycle

Delayed payments from customers are one of the most common causes of cash flow issues. If the receivables cycle is too long, it can leave a business scrambling to pay suppliers, staff and operational expenses.

Our advice – Ensure clients are fully aware of credit terms and encourage payments to be made either early or on time.

Using business finance – Invoice finance allows the unlocking of cash tied up in unpaid invoices. Instead of waiting for customers to pay, a business can access funds immediately, keeping operations running smoothly.

3. Manage expenses

Careful expense management is essential for maintaining positive cash flow. This doesn’t mean cutting corners—it means identifying areas where spending can be optimized.

Our advice – Regularly review expenses to identify wasteful spending or opportunities to renegotiate supplier costs.

Using business finance – Asset finance can be utilised for specific investments such as upgrading equipment or adopting energy-efficient solutions. The long-term benefits being a reduction in ongoing operational costs and improve efficiency.

4. Build strong cash reserves

Having strong cash reserves acts as a financial cushion for unexpected expenses or periods of low revenue. It’s an essential part of staying financially healthy in a volatile business environment.

Our advice – Allocate a portion of profits to a reserve fund each month to gradually build a safety net.

 Using business finance – Access to a business overdraft or emergency fund can act as an additional layer of protection, ensuring a business is fully covered even if your cash reserves are temporarily depleted.

5. Plan for strategic growth

Rapid growth can strain cash flow if not managed carefully. While expansion is exciting, it often requires significant upfront investment in stock, people and infrastructure.

Our advice – Develop a growth strategy that aligns with financial capabilities and set realistic timelines for scaling operations.

Using business finance – Business loans or asset financing can provide the capital needed for growth initiatives without impacting day-to-day cash flow. By spreading the cost of investments over time, a business can focus on scaling sustainably.

6. Leverage technology

Modern financial tools and software can simplify cash flow management, providing real-time insights into a financial position. From automated invoicing to expense tracking, these tools reduce manual work and improve accuracy. 

Our advice – Invest in cloud-based accounting platforms that integrate seamlessly with bank accounts and other financial tools.

Using business finance – Use business finance to invest in technology that enhances cash flow visibility and efficiency, ensuring potential issues are resolved quickly.

To summarise, navigating cash flow challenges can be daunting but by partnering with a trusted finance provider these issues are quickly resolved. From bespoke funding solutions to expert guidance, we can help implement strategies that keep a business financially healthy.

This extract was taken from the Times and states that “nearly a third of businesses will need financial support” – According to BDO, British businesses are facing significant challenges due to supply chain disruptions and rising costs, with 32% of mid-sized firms indicating they require additional financial support, including bank loans and government grants. Richard Austin, a partner at BDO, said: “[Mid-sized businesses] are the engine room of the economy, employing more than eight million people across the UK. They need a more favourable operating environment, underpinned by policy and taxation, that enables better access to capital and encourages ongoing investment in new technologies.” However, the survey also found that 49% of businesses felt they were in a stronger position than before the pandemic with £4.6m investment earmarked by mid-sized companies over the next two to five years.

Our team of finance specialists are on hand to support with any business finance needs. Recently we have supported an electrical retailer in Thame with funding of £195K. We have worked with a car dealership in Buckinghamshire securing them £125K. Thirdly we have secured £125K for an IT Security Consultancy firm based in Oxfordshire.

If you have any questions or need some help, please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.