Cash is vital to you and your business, lack of cash kills businesses.
So how can you improve cash flow:
- Prepare a detailed cash flow forecast, schedule your direct debits and standing orders, knowing how much cash you need and when will help you focus on where the cash will come from
- Invoice your clients as soon as you can, often small businesses invoice late and this just lengthens the time it will take to collect payment
- Get stage payments on large contracts
- Negotiate payment terms with your suppliers, try to at least match the client payment terms with the supplier terms
- If you are able to spread payments do it, for example, most insurance companies will offer you that chance to spread the payments over 10 months
- Adopt ‘just in time’ for stock items, don’t carry more stock than you need to
- Pay sales commissions only after the client has paid
- Change weekly payrolls to monthly where possible
- Sell assets you don’t need
- Sell obsolete and slow moving stock
- Consider paying mileage allowances rather than owning company cars
- Chase your debts
- Get a good credit rating as it will help you negotiate better supplier terms
- File your accounts and tax returns on time to avoid penalties
- Credit check your clients and agree terms based on their credit history and rating
- Diversify to smooth out seasonal trends
- Control your costs and reduce them where possible
- Make cash collection a KPI for your business
- Finance your fixed asset purchases
- Use Invoice Finance if your clients demand long terms
Cash Accounting is a VAT scheme and it will improve your cashflow if your customers pay more slowly than you pay your suppliers and other costs. For example if your clients pay on 60 to 90 day terms and you pay suppliers on 30 days then VAT Cash Accounting should work in your favour. When you use Cash Accounting you pay VAT based on money received and money paid (so you exclude customers who havent paid).
You can use the Cash Accounting Scheme if your estimated VAT taxable turnover during the next tax year is not more than £1.35 million.
Once you start to use cash accounting, you can continue to do so until your VAT taxable turnover reaches £1.6 million.
You can use Cash Accounting with other VAT Schemes, for example the Flat Rate Scheme.
You do not need to complete an application form or advise HM Revenue & Customs (HMRC) to start using the Cash Accounting Scheme.
You can start using the Cash Accounting Scheme at the beginning of any VAT period if you are already registered for VAT
Why pay VAT before you need to?
Many small businesses are suffering slower and slower customer payment as highlighted in this link
Lack of cashflow is the main reason for business failure.
Bartercard can help because they can provide an interest fee credit facility to buy goods and services from their members, Bartercard have 4000 UK business members including solicitors and debt collectors (which can help collect your cash)
Contact me for more details firstname.lastname@example.org