At the end of the day, it doesn’t matter what your turnover or profit look like on paper — if you haven’t actually received the cash, your business can quickly find itself in trouble. You need real cash in the bank (or petty cash) to buy supplies, pay your bills, and pay yourself. Without it, your business simply can’t survive.
Cash flow is, quite literally, the flow of money in and out of your business.
It may sound obvious, but to keep your business healthy, you must have more cash coming in than going out each month. Regularly assessing your cash flow helps ensure you always have enough to cover your costs and plan ahead.
🔍 Step 1: Know Your Monthly Costs
Start by listing all your monthly expenses — for example:
- Rent or mortgage
- Insurance
- Website hosting and subscriptions
- Accountancy fees
- Wages (for staff and yourself)
- Phone, internet, and utilities
- Advertising or networking costs
Then look at annual or occasional costs — such as insurance renewals, professional subscriptions, or website fees. Divide these by 12 to get an estimated monthly equivalent and add them to your regular monthly costs.
This gives you the minimum amount of income you need each month to break even.
📈 Step 2: Forecast Your Income
Do you have regular monthly payments from clients, or are your sales more ad hoc?
Try to project your income realistically — and it’s wise to consider a worst-case scenario so you know where you stand if things slow down.
If you find your cash flow is negative (more going out than coming in), decide whether it’s a short-term or long-term issue.
- Can you cut costs by finding cheaper suppliers or reducing overheads?
- Can you invest some extra capital or take out a short-term loan to bridge the gap?
💰Top 5 Tips to Improve Your Cash Flow
- Invoice promptly.
Your clients can’t pay until they receive an invoice! Send it as soon as the work is complete and always include your bank details – you’d be surprised at how many miss this bit!
- Request deposits and stage payments.
For longer projects, agree on a deposit upfront and stage payments throughout — rather than waiting until the end for a lump sum.
- Use payment links.
Add services like PayPal or GoCardless to your invoices so clients can pay instantly with one click. This simple step can significantly speed up payments.
- Set clear payment terms.
Always include a due date on your invoices. Without it, clients won’t know when payment is expected.
- Automate reminders.
Many accounting systems can send automatic reminders for overdue invoices. Set them up once and let the software do the chasing for you — it’s a huge time-saver and improves cash collection.
💸Keep Cash Flowing
Strong cash flow is the lifeblood of your business. Regularly review your incomings and outgoings, plan ahead for slow months, and put simple systems in place to get paid faster.
If you’d like tailored advice or support managing your cash flow, visit our Cash Flow page to see how PPF can help
