21 ways to improve your cash flow

There are two fundamental goals at the heart of improving your cash flow: control your expenditure and regulate your income. To that end, there’s a raft of clever tactics and useful services that can help smooth out peaks and troughs, as well as enable you to explore expansion opportunities and reduce the chance of being caught short if the unexpected happens.

1. Ensure you have good financial reporting
The first step to good cash flow management is to understand the ebb and flow of money through your business. For that, you need accurate, up-to-date information. Whatever your size of business, you should be routinely receiving a regular stream of data from your finance department. Management reports (for reviewing your current balance sheet), debtor books, budgets and cash flow forecasts should be at your fingertips.

Neville Upton is CEO of customer insight specialist The Listening Company and he’s in the enviable position of not worrying about cash flow because his finance team have a firm grip on the numbers. He says, ‘I can get on with growing my business. Ideally, that’s the situation any CEO should be in. As a result, having started from scratch in 1998, we are on course to hit £25 million turnover this year.’

Simon Kearsley, MD of software provider Symmetry, believes automated systems can really help manage cash flow. ‘For example, it’s best not to rely on people to remember to notify the finance department when a sales deal has been signed. The sooner you can issue an invoice, the sooner it will be paid. By having an integrated sales and finance system, you can ensure that all relevant information is updated in real time and the whole process is joined up.’

2. Combat seasonality by diversifying
All businesses have fluctuating levels of income and expenditure, which can play havoc with cash flow if not properly managed, especially if the peaks and troughs are unpredictable. For businesses where demand for goods and services is affected by seasonality, this often means they face their greatest costs during their quietest period. And it’s not just Christmas cracker makers or Easter egg producers that are affected by annual highs and lows.

‘All football clubs have the same cash flow problem because of the fixture list,’ says football legend Barry Fry, the ebullient owner of Peterborough United FC. ‘Some months we’ll have four home matches, other times we’ll have just one and during the summer we have none at all. Other funding, such as TV revenue, also comes in at different times of the year, not on a monthly basis.’

James Lambert, chief executive of ice cream manufacturer Richmond Foods, knows that sales will always peak in the summer months, but he’s managed to diversify and pile up profits in the winter months too. The secret, he says, is being innovative while playing to your strengths. ‘Our Skinny Cow range is a good example of this, as low-fat ice cream sells particularly well in January. While you can sell anything when it’s 85 degrees outside, in winter you have to be clever.’

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