Can
you run a successful business without borrowing? Some do, and if the
circumstances are right, with some good cash flow management, you could too.
Managing the Circumstances
The
circumstances will be right when the business income is reasonably predictable;
you are not planning excessively expensive changes; you have ample stocks; and you
have the staff you need and the cash to pay them. These are aspects that can
also be managed, but you need to take them into account when considering the
cash flow situation.
The
circumstances may not be right if you suffer from fraud, theft or a serious cyber-attack.
While you can take steps to protect your business from such wrong-doing, this
is not manageable in the same way. Crises like these, or natural disasters such
as flooding, may need more cash than you have available to be able to recover.
But these are rare circumstances, and while it is good to have contingency cash,
your outsourced bookkeepers would recommend that, like most successful
entrepreneurs, you do what you can for protection and then stop worrying about
them.
Managing the Cash
Flow
Cash
flow, on the other hand, must be kept in mind all the time. The most important
factor in good cash flow management is keeping accurate and up to date records.
This is what will allow you to know the state of your finances at all times and
have no nasty surprises.
Regular
cash flow forecasts will also allow you to project that knowledge forward, so
that you will know when monies are due in and can allocate them for spending.
This means you can plan activities for when you can make financial resources
available, and will be able to develop your business in this way.
Enlist the Help of
Your Bookkeepers
Your
outsourced bookkeepers will be
invaluable to you in helping with this. They can also assist with controlling
your debtors and paying creditors at the right time. Paying within terms but
not too early means you will keep your cash as long as you can, and maintain a
good credit rating.
Use
your bookkeepers wisely and they
will ensure that invoices go out promptly with advantageous terms. They will
also flag up any potential problems with cash flow that you might otherwise
miss. Noting them in good time means they can probably be avoided. Talk to them
about whether late payment penalties or invoice factoring would be a good idea
if you have any customers who take their time to pay.
All
of this could help you manage without having to take out a bank loan or search
for alternative funding.
