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Business Advice

Improving Cash Flow In Uncertain Times

You must be well informed about your cash position. This will help you prepare for any cash flow gaps or issues that may arise. It’s this foresight that can make all the difference when the business is battling against tough external economic forces and a potential downturn in sales.

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Keeping on top of your cash flow is even more critical during tough economic times.

With a global slowdown on the cards, energy prices soaring, and supply chain challenges, cash will likely be tight over the coming year and beyond. Cloud technology and fintech apps like Stripe or PayPal can give your business the best control over money.

Why is cash flow so important?

You need enough money coming into the business to cover your outgoings, with enough surplus cash to deliver a profit. This is the key to keeping your business operating.

A recession can significantly impact your income if cash flow is not monitored and controlled correctly. 

Your customers will have less disposable income for your products, and business customers will be looking to cut costs and reduce supplier spending. As a result, your business may see a decline in sales, which could mean:

  • Reduced income
  • Less cash to cover operating and material costs
  • Not enough money to cover payroll and suppliers
  • Or, in the worst-case scenario, there would not be enough money to continue trading.

How can you improve your cash flow situation?

It would be best if you were well-informed about your cash position. This will help you prepare for any cash flow gaps or issues. This foresight can make all the difference when the business is battling against formidable external economic forces and a potential downturn in sales.

These are effective ways to help you stay on top of and safeguard your cash flow using technology.

Switch to Cloud Accounting

Accounting and finance technology, such as Xero, has rapidly evolved in the past decade. The latest crop of cloud accounting platforms all offer detailed reporting of your cash position. These software tools generally provide real-time data, giving you up-to-date cash numbers.

Integrate with cash flow forecasting apps.

Cloud accounting platforms let you add third-party apps to create a custom app stack of helpful business tools. There are plenty of cash flow forecasting apps to choose from. Apps such as Spotlight Reporting or Futrli allow you to predict your future cash flow position. 

Plan for the cash flow gaps

If you have forecasted correctly, and it shows a shortfall of cash coming up, that’s the time to take evasive action. If you see a cash hole approaching next month, it’s time to look for new opportunities to fill that hole. That could mean extending your bank overdraft, taking out a small business loan or taking out an invoice finance facility with a lender.

Consider reducing overheads

Another way to increase your cash flow is to reduce your expenditure. If you can cut back on expenses, overheads, and any unnecessary costs, it can help you re-balance your cash position when cash flow is getting tight. Look for cheaper suppliers, buy in smaller quantities and take every opportunity to cut costs and keep your spending more sensible.

Increase your prices

Raising your prices is an obvious solution to cash flow problems and can bring in more cash with the same sales volume. However, this is a balancing act. Putting your prices up could alienate existing customers. You may even lose customers. But if you can find the sweet spot for your pricing AND drum up more sales, you can quickly increase revenue and give your cash inflows a healthy boost.

Review your cash flow reports regularly

Looking at your cash flow numbers and reporting regularly is essential, not just at period-end. This is particularly important when economic times are tough. With the most current cash information, you can make informed business decisions, keep the business operational, and maintain consistent cash flow and incremental growth in your cash flow.

Talk to an advisor today

With your business in a healthy cash flow position, you give yourself solid financial foundations for riding out a global recession. No business is immune to these conditions, but with liquid cash, you have more flexibility and capital to play with.

Do you need help improving your cash flow processes? Contact Clout Advisory today to learn about our leading sophisticated models enabling cash flow monitoring, management and reporting to help you run a better business with healthy cash flow.

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