Cash is King? – you’d better believe it!

Cash is King? – you’d better believe it!

I’m a small business owner and an accountant. So I’ve seen the inside of many an SME. Here’s the single most important thing I’ve learned: As a leader of a business, especially a small business, your main role, almost your only role, is to ensure the positive cash flow of the business.

Everything else is incidental: Keep the staff happy and motivated? Try motivating your team after the end of the month when the payroll is due and the bank account is empty. You’ll motivate them right out of the door.

Everything flows from cash flow. And as a business leader, whatever you do in your business has to be done with one eye on the bank.

From concept to cash

Even when you aren’t focussed on it, the job in hand is predicated on getting money in the bank. The whole process is a bit like the “There Was An Old Lady…” song we all learned at school. Except for businesses its more like “We created a website, to build up an interest, to create a buzz, to generate clients, to get them to buy, to send them an invoice, to get them to pay”. So, now we’ve established how important the free flowing of funds IN to the business, and the retention of those same funds, here’s our top ten tips (in no particular order) for managing cash flow. There’s really no point in getting everything else right if you just go and cock up the cash flow.

Tip 1 Make it easy for customers to pay

Offer as many payment methods as possible: cash, cheque, bank transfer, direct debit, credit cards. Oftentimes, you don’t even need to set up a merchant services account. Apps such as Square ( and  iZettle ( can have you accepting card payments online in matter of minutes. And GoCardless ( allows you to accept Direct Debits. And there’s obviously PayPal as well.

Tip 2 Accelerate invoicing

The quicker you can get an invoice to Accounts Payable of the customer, the better. Many online accounting systems like Xero or Freeagent allow you to generate invoices on the fly and email them by PDF. The quicker the invoice reaches the client, the quicker you’ll get paid. Remember to add a link to your payment services in Tip 1.

Tip 3 Invoice accurately

If there’s one thing that’s certain, if you make a mistake on an invoice, it will not be paid. Remember that your customer is also more than likely working within serious cash flow constraints and will be look for reasons to not to pay until they absolutely have to. If you make a mistake on your invoice you can guarantee that this will give them an excuse not to pay. Don’t give them that excuse: make sure your invoices are correct.

Tip 4 Offer early settlement discounts

If you have the margins, and if you can afford it, offer discounts for early settlement. But you need to make it worthwhile. 10% is about the minimum that’s likely to make any odds.

Tip 5 Take up credit references

While not exactly foolproof (see Northern Rock, RBS etc) credit checking can help avoid bad debts. There’s no point in adding to this month’s bottom line with a sales invoice that’s going to come straight off next month’s. Experian and Equifax are a good start but also look at Creditsafe. You can also DIY by asking potential customers to provide references from other suppliers and their banks.

Tip 6 Ask for partial (or total) up front payment

There’s no shame in asking for upfront payment. If you’re embarrassed to ask, then you need to reconsider your career. Remember, big business were once small, established businesses were once start-ups. They all appreciate the pain of early stage cash flow and might be quite happy to help you out a little. But be prepared for a little quid-pro-quo. Upfront payment might merit a discount or an improved delivery schedule.

Tip 7 Minimise fixed cost expenses

So far we’ve focussed on getting cash IN. But, nothing drains cash flow like fixed costs when there’s nowt coming in. Start ups should avoid costly rents and staff costs until there is a level guaranteed income. Need a place to work? hot desk. Need a meeting space? try hotel lobbies – it’s free and surprisingly professional. Use a virtual PA or call answering service like or until you can afford a real person to answer your ‘phone and make you coffee.

Tip 8 Only pay bills when you have to

I’m not suggesting you take the mickey out of suppliers but if you’ve negotiated terms, use them. If you’re given thirty days, pay on the thirtieth day. But not a day later. When you have a surplus of cash it may be an idea to pay early as well. This will normally give you some goodwill with your customers and might allow you a little flexibility when the time comes when there is a bill due and there’s no cash available for it.

Tip 9 Set up pay monthly / subscription arrangements

If the service you provide is seasonal and therefore likely to cause your cash flow to experience significant peaks and troughs, try to even these out by offering your customers the ability to spread their payments monthly. This will probably be as attractive to them as it is to you.

Tip 10 Make sure you monitor cash flow

I’ve saved the most important until last: Get yourself a good accounting system that will allow you to monitor and control your cash flow. The old adage “what you can measure you can manage” has never been truer than when it comes to cash flow. A good system will allow you to chase and collect overdue payments, schedule payments of your own bills and to predict your projected cash flow and assess what impact certain events – ie, the non- or late-payment of a customer invoice will have. When you have this information to hand, you take appropriate action.

So that’s it. Take these tips into your business, apply them appropriately and you can guarantee your cash flow will be as good as it can possibly be.