UK Businesses Feeling Cash Flow Pinch
This week, a report by Accenture and Xero was released stating that a staggering 94% of businesses in the UK suffered at least one month of negative cash flow last year. Data from thousands of small businesses was analysed and has shown that the average small business now has a crunch in cash flow for four months out of the year.
So what is negative cash flow?
Put simply, it’s when your monthly outgoings exceed your income. If you have negative cash flow for too long your business will run out of money.
What’s to blame?
Obviously the Covid 19 pandemic had a large impact on most businesses but that’s not the whole story.
Late payments are also a major contributing factor and a lot of big businesses seem to be the culprits. Another Xero study shows that 55% of large organisations admit to paying small businesses later than the agreed terms in the last year.
So what can you do as a small business owner? Well, the first step is knowing you’re in negative cash flow when it happens. It’s essential to know your numbers so that you can plan ahead and ensure you’re not overspending when your income is down. Monthly management accounts from Mazuma or keeping a good handle on your own bookkeeping are a great way to start.
Clever Cash Flow
Check out the rest of our tips from our co-founder, Lucy.
Cash really is the life-blood of your business, and timing is everything. Most businesses don’t struggle to make the right sales, they struggle to get the timing of cash-in and cash-out right.
Get paid upfront
You can’t walk out of Tesco without paying for your groceries, so why should your business be any different? If it’s really not the ‘done thing’ in your industry then think about charging deposits or having instalment payments instead.
Have solid terms and conditions
This goes without saying. Ensure your terms and conditions state clearly the consequences of late payment, such as interest charges or withholding service.
Dedicate time or resource purely to credit control
Unfortunately, some bad payers need a lot of prompting before they’ll stump up your dough. Put time aside for email chases and getting them on the phone.
Make it easy for customers to pay
Include payment links when sending invoices, offer discounts for early payers or simply grab a card reader for your business!