Cash flow management: vital to the success of your small business

With so much financial pressure on small businesses it is imperative that you have a cash flow management plan in place to help you through these troubled economic times.

Dealing with Late Payments
Late payments can be crippling in more ways than one. If the problem is not addressed by setting up a method of prevention in the first place, serious problems will ensue; problems that will affect the profitability of your business, because you will be spending valuable time and resources chasing money and losing interest. And more worryingly, these problems could lead to difficulties obtaining credit.

Set out Clear Payment Terms
Prevention is better than cure; make sure you have clear terms of business that set out your payment terms, and ensure you enforce those terms. Take action to collect any debts promptly so that customers realise they cannot take liberties.

Ensure invoices are sent out regularly; don’t delay in sending them as soon as an order or job is completed.

Keep track of invoices and payment times
Keep track of your invoicing and payments due: make sure you have a record of who to invoice and when and when their payment is due. Also, keep a record of how long individual customers take to pay so that next time you deal with them, you are ready to face any payment issues before problems arise.

No time to manage your cash flow?
And if you do not have the time to dedicate to managing a cash flow programme, outsource to a company that does. Office Assistants can help you put a plan in place and will even manage the whole process for you so that you can get on with running your business and concentrating on the work side of things, whilst we take care of getting the most out of your business’ profitability.

Reducing your Payment on Account

If you are due to make your second payment on account to HM Revenue & Customs come 31 July, but you feel this year’s earnings will be lower than last year’s, read on.

Payments on account are based on your tax liability for the previous year. You paid the equivalent of half last year’s liability on 31 January and the remaining half is due on 31 July.

If you expect your 2009-2010 income to be less than your total income for last year then you may be able to reduce your July payment. This is a worthwhile exercise if you know your earnings will be lower this year, but you need to be careful! Reduce it too much and you’ll be liable for interest on the difference, and a possible penalty.

If you are in doubt, contact us for advice before taking any action.