As your business grows, so will your costs. Cashflow management will play a critical part in the success of your business. Here SWIG Finance’s business manager Rachael Taylor shares her top tips for successful cashflow management.

Business Manager Rachael Taylor

Having a Realistic Cashflow – Oftentimes we see business owners omitting vital cashflow elements. Remember that it is not just turnover that counts. To provide a realistic cashflow you must also include all the business overheads. So make sure to include all costs; manufacturing, staff, admin, legal, marketing, utilities including waste bills, and don’t forget to include your phone bills. Even if you mainly use your phone for personal calls, your accountant may want you to include this in your overheads.

Your cashflow will change as the business grows – new hires will inevitably affect your cashflow but it is more than increasing salary expenses. Consider how this would affect your overheads, for example, hiring an extra person will mean your stationery supplies will increase, along with waste bills, and your sundries, not to mention employer tax and other staff-related costs. As your customer base grows, so will your sales and your manufacturing costs. If you are ordering larger amounts of materials/goods are you able to negotiate better terms? This must all be factored into your cashflow.

Can you stretch payment terms? But don’t shoot yourself in the foot! – while some businesses offer a discount for paying invoices early, you can also look at this from another perspective. How far can you stretch terms without paying a penalty? Many business owners also forget to utilise their credit/charge cards, these can give you a short-term credit facility at no cost if you clear the balance each month. Equally – do not delay issuing your own invoices – delayed payments can have a significant knock-on effect to your cashflow.

Can you consider outsourcing? – Everyone has their own set of unique strengths and weaknesses. Whilst it is key that you take advantage of where your strengths lie, where you find yourself with a skills gap, could you consider outsourcing? Say, for example, each month you find yourself with a huge amount of admin work, but this is not your greatest skill, you could hire a virtual assistant who could perform these tasks much quicker than you could – because that is where their strengths are. It might seem like an additional overhead that is eating into your cashflow to begin with, but in the long-term this could actually save you money, and time as well.

Controlling your costs – you will need to monitor you cashflow monthly to make sure you are controlling your costs – costs have a habit of creeping upwards! Being familiar with your cashflow will give you a better understanding of your resource, so that if a big order comes in, you will be able to effectively manage it without compromising your cashflow.

The bottom line is that being familiar with your cashflow will give you a deep insight on how the business is performing. By monitoring this regularly you will be able to identify when external finance could be a useful tool to help you grow your business.

As well as giving an accurate indication of when you might need additional finance, you will be able to illustrate and justify your requirement to lenders.

If you have a future requirement for external finance, apply before you need it – you’ll save yourself a lot of stress.

And always remember – you want to make it easy for a lender to yes, not easy for them to say no.

About SWIG Finance

SWIG Finance is the South West’s leading Community Development Financial Institution. We are passionate about bringing social and economic benefits to people and places in the South West.

We do this by providing support and finance to Start Ups and growing SMEs that can create and secure employment opportunities.

As the South West’s leading delivery partner for Start Up Loans UK, we can provide Start Up Loans from £500 – £25,000. For more information visit https://www.swigfinance.co.uk/start-up-loans/

We also have business loans from £25,001 to £250,000 available to South West SMEs who cannot access sufficient funding from their bank https://www.swigfinance.co.uk/business-loans/

For businesses based in or relocating to Cornwall and the Isles of Scilly, we work with The FSE Group, the appointed CIOSIF Fund Manager, on delivering smaller business loans as part of the £20 million allocation for debt finance in Cornwall & the Isles of Scilly https://www.swigfinance.co.uk/ciosif/

If you would like to have an informal discussion about your funding requirements, get in touch with our friendly and professional team to find out how we can help: info@swigfinance.co.uk / 01872 227 930.