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Managing your cash flow

Controlling debt is a key part of income control. Customers should be sent reminders in

advance of the due date of payment. Payment by direct debit and credit card will also help

cash flow. Do however check the creditworthiness of new customers and review the credit

limit and terms of late payers. If you are unsure of any new customers, take the money up


Cash flow forecasting

Cash outflow is something that can be accurately forecasted by controlling costs. You know

that you’ve committed to rent, rates, light and heat, for example, and there is a certainty to

those outflows.

It’s difficult to forecast the cash inflow unless you have contract work. You can predict the

trend and analyse your minimum income, but it will never be accurate. For now you just

need to keep a tight rein on expenditure and try to get new business from your customers.

Top tips to managing your cash flow:

• Shop around for better credit

• Switch suppliers

• Reduce overtime

• Invest in technology to achieve efficiencies

• Renegotiate credit terms

• Introduce cost control procedures

• Review and scale back of non-essential activities

• Improve debtor management

• Increase overdraft facility

• Examine invoice discounting option

• Change purchasing and stock arrangements

• Review internal policies such as expenses and travel policy

In conclusion the outlook is bleak and commentators tell us that business will have to plan for two and possibly three years’ of difficult, challenging times but those who take the appropriate actions now and manage their cash well will emerge from the current downturn in a much stronger position.

Suzanne Shaw is Director of Business Development with the Institute of Certified Public Accountants in Ireland (CPA)

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