Michael Office
VP Product Marketing, Sage
Businesses have been struggling with cash flow due to the pandemic but as things open up again, now’s the time to get finances back on track.
Cash flow is the lifeblood of businesses. But the impact of the pandemic has left them facing financial difficulties. In fact, 26% of small businesses have cited cash flow as one of their biggest challenges, according to Sage research.*
With COVID-19 restrictions being relaxed in Ireland, businesses can focus on improving their cash flow. There’s a number of things they can do to make that happen.
Regular cash flow forecasting
Businesses need to ensure they’re managing their finances effectively. Creating and maintaining a cash flow forecast will help, so they can estimate how much money is flowing in and out of the business across a period of time. This can allow them to make better decisions and plan ahead.
Rather than using manual processes and spreadsheets for forecasting, cloud accounting software such as Sage Accounting will help businesses work efficiently and predict future cash flow more accurately.
Businesses should also review cash flow patterns to identify cash flow swings. There might be times in the year when sales are low – plans can be implemented in advance to mitigate them.
Review spending and cut unnecessary costs
Reviewing outgoings is an important step to improve cash flow. What’s being paid for that’s unnecessary?
One way to reduce expenses is to lease equipment instead of buying it. By paying a small fixed monthly fee, rather than a large upfront cost, businesses can avoid eating into cash reserves.
Additionally, if businesses have money tied up in inventory that’s not selling, it could be detrimental to their cash flow. With cloud accounting software, they could identify the poorest selling products, sell them at a discount, and spend the resulting cash on top-selling items.
Work with suppliers on payment terms
Businesses should review their accounts payable processes. Rather than paying as soon as an invoice comes in, they should do so according to the payment terms. If it’s 30 days, for example, waiting until then to pay – and paying on time – will ensure there isn’t an immediate cash shortage.
Businesses should also try negotiating with their vendors for longer payment terms, or even see if it’s possible to get a discount in exchange for paying early.
For support with finance options, businesses should seek the advice of an expert, such as an accountant, who understands their situation.
Send invoices straight away
Sending invoices to customers immediately, keeping track of them and following up on late payers is important to ensure cash comes into the business in a timely manner.
With Sage Accounting, businesses can automate the invoicing process. They can create professional invoices, easily send them to customers and track them, so they can see who’s paying on time and who to chase. This will save time and help to increase productivity
Review finance options
If businesses need a quick cash flow boost, a review of finance options and extra investment sources will help. Small business lenders offer loans and grants, for example, so it’s worth exploring what’s available.
Although the Government’s COVID-19 supports for businesses are winding down, there’s still help available. The COVID-19 Business Loan from Microfinance Ireland is one such example; eligible businesses can access a loan from €5,000 to €30,000.
For support with finance options, businesses should seek the advice of an expert, such as an accountant, who understands their situation.
Less time on admin, more time growing
By implementing these tactics, businesses can give themselves the best chance to improve their cash flow. And with cloud accounting software, they can manage their finances effectively, and spend less time on admin, so they can focus on business growth.
To find out how you can use technology to support your business, visit www.sage.com
*Impact of Covid-19 on Ireland’s SME’s 2021 – prepared by YouGov