News & Views

4 Cash flow management tips for SMEs

by John Lane - Aug 11, 2016

Cash flow management is vital for any business - and especially so for SMEs (Small to Medium Enterprise)- but it's also something that very few start-ups have a good enough handle on. Plus, growing a business means you'll often be faced with financially precarious situations that stand to benefit your organisation in the long run. In today's crowded global markets, the businesses that come out on top are those with real insights into the way cash moves around their organisation, the foresight to know what their financial requirements will be in the future, and the tools to achieve that in the most efficient way possible.

With the powerful financial software available today, it's easier than ever for businesses of any size to get end-to-end views of their cash flow. In this blog, we'll look at a few ways that SMEs can make cash flow management easier and more efficient.

Keep your books organised

This might sound like a no-brainer to some, but one of the most common barriers to good cash flow management in small businesses comes in the form of bad bookkeeping. Regardless of how good you may be at what you do, how good your rates are, or how many clients you have, it's all for nought if it doesn't reflect on your balance sheet. Simply maintaining a good numbering system for invoices can make a world of difference.

Of course, running an SME is no easy task, and many small business owners (as well as key staff) are often too busy running their organisation to give the necessary attention to their bookkeeping. For time-starved business owners, it's worth looking at some accounting software options - most reputable brand provide automation capabilities that make generating and sending invoices a breeze. We've included some suggestions for software to check out later in the blog, but more about that when we get there.

Forecast cash flow to stay ahead of the curve

Cash flow forecasting allows you to make informed decisions about how cash might be flowing in your business months down the line. Even if your forecasts aren't always 100% accurate, they make responsible cash flow management much easier to achieve by giving you some idea of how your business will perform at a future date and allow you to prepare accordingly. It's useful to compare actual results with your forecast, as this will improve estimates the next time you're forecasting cash flow.

While it's possible to manually forecast your cash flow, there are some powerful accounting software tools that can generate extremely accurate forecasts in an instant, and display the results in a way that is visually engaging and easy to understand.

Keep all your credit terms in sync

The credit terms set by your suppliers should be reflected in those that you set with your customers. Failing to do so can easily unhinge your cash flow management strategy, as out-of-sync terms quickly result in negative cash flow. For example, if your invoices request your clients to pay within 30 days, but your supplier expects payment within two weeks, you're likely going to be in an awkward position. While you could opt for factoring (essentially taking a loan equal to your outstanding invoices), a far easier and safer option is to renegotiate terms with either party, or to provide some kind of incentive for clients to pay early, such as discounts on early payments or penalties for late payments.

Consider a cloud accounting platform

As we've mentioned a few times in this article, the variety of cloud accounting platforms on offer today opens up a whole new world of possibilities for SMEs. Cloud accounting platforms don't just make cash flow management easier by handling the time-consuming and repetitive aspects of your accounts team, they host all your business data remotely - meaning you can have full access to your accounts data whether you're in the office, at home, or on the other side of the globe.

Moving your cash flow management to the cloud also means you don't have to worry about the costs of scaling your business up or down - cloud services are built with flexibility in mind, and your provider will be able to adjust your solution to cater to increasing or decreasing levels of use.

If you're interested in finding out more, check out some of these popular cloud accounting platforms:

If you want to know more about how the cloud can benefit cash flow management in your organisation, PowerNet offers a comprehensive cloud for business service called PowerCloud that can cater to the needs of any business. Find out more about PowerCloud here.