Managing your cash flow - checklist


Managing your cash flow - checklistRead our list of tips for controlling your cash flow, including chasing debts and avoiding the dangers of overtrading.

  • Regularly monitor and revise your cash flow budget to anticipate potential cash shortages.
  • Invoice promptly and chase outstanding payments vigorously. Invoices for business-to-business transactions must be paid within 60 days, unless an alternative payment period has been agreed. Public-sector bodies must pay invoices within 30 days.
  • Consider charging interest on late payments and debt recovery compensation charges to deter late payment.
  • Develop warning systems to identify where delays or unexpected changes could cause the business to run out of cash.
  • Be prepared to trade off profitability and other business objectives when your cash flow position is, or may become, critical.
  • Minimise the amount of cash owed to you by restricting credit periods or factoring debts.
  • Generate short-term sales income by offering incentives to bring forward purchases and discounts for cash payment.
  • Cut unnecessary costs and shop around for competitive prices; negotiate generous payment periods and short delivery lead-times.
  • Use your stock control system to minimise cash tied up in stock.
  • Assess your cash flow position before committing to any new expenditure or increases in overheads. Consider using leasing to finance assets.
  • Be prepared to turn down orders if you cannot finance them. Negotiate deposits or stage payments for large orders and long-term contracts.
  • Build relationships with financiers and suppliers so they will extend extra credit when you need it.
  • Arrange additional financing before you need it. Seek equity investment if cash flow will not safely cover interest payments.
  • Sell unproductive or superfluous assets and discontinue business lines with negative cash flow.
  • Take into account short-term fluctuations which do not show up on monthly or weekly budgets.