Information provided by Kidwells Accountancy on our website is for informational purposes only. For bespoke advice, call 01432 278 179 or email email@example.com to learn more about what is best for your business.
The Easter holidays are with us and if you employ staff, particularly those with children, you may well have many employees on annual leave meaning a smaller workforce for a while. Depending on your business this could have an impact on your cash flow. It could be that production is down or that it is a naturally busy time for your business, and you are short on manpower.
Why is cash flow important?
For a business to have control over the way it runs it must generate enough cash to meet everyday running costs and avoid taking on debt.
Without enough cash, a business will find it difficult to run effectively as normal activities such as paying suppliers, paying rent or mortgage plus utilities, and paying employees would all be in jeopardy.
Improving cash management
Three areas to help cash management are:
Accounts receivable – money owed to the business
To ensure timely payment from creditors, it is essential to check the creditworthiness of customers and chase up overdue payments regularly so that cash arrives in the business when it is expected.
Accounts payable – money owed by the business.
To aid with cashflow, it is always better to leave payment to suppliers until the due date and not before thus ensuring that cash is available should a creditor pay late.
It is important not to have too much cash tied up in stock – just have enough for immediate business needs.
Getting cash flow right
A balance needs to be achieved between having too much cash available just in case, and not having enough. If a business has too much cash, it may be missing the chance to invest and generate additional cash. But if it does not have adequate cash, it will have to borrow money and pay interest or sell off investments to provide the cash needed.
Cash flow should be reviewed months ahead so that times such as holidays, that could prove to be a problem for cash flow, can be weathered with enough resources to keep the business healthy.
How can we help?
Make sure you are getting the best advice about your cash flow. Call the team for a chat and see how we can help on 01432 278 179.
Disclaimer: Information provided by Kidwells Accountancy on our website is for informational purposes only. It is provided in good faith but we make no guarantee of any kind regarding the accuracy, reliability, or completeness of any information on our site. We always recommend businesses seek independent legal and financial advice before working with us or acting on any information on our website.