I was lecturing at the University of Liverpool last week —something I do a few times a year – talking to students who are taking entrepreneurial modules. In my latest session, one of the main topics was cash flow—how to monitor it and how to improve it.
During that session, I shared my nine top tips for improving cash flow. In hindsight, I’m wondering why I did a “Top 9” rather than the classic “Top 10”, but I’ll stick to the nine I came up with!
1. Keep Good Records
Keeping good financial records – especially doing a cash flow forecast – is going to help you stay on top of your cash flow. But keeping on top of your Xero/Quickbooks and having all the information at your fingertips means you can see how different activities will impact you, spot where future cash pinches might arise, and monitor your progress.
2. Set Customer Terms
Make it very clear to each of your customers when you expect to be paid. State it before you go into business with them and on your invoices, so there’s no confusion about your payment terms.
3. Remind Your Customers and Chase Debts
Being British, we often don’t like talking about money or chasing debt – it can feel as if we’re the ones being rude. But, if you’ve provided a product or service, you deserve to be paid. So do chase those debts! You can remind customers just before the invoice is due and, of course, remind them again if it’s overdue. If you’re worried about doing this yourself, most accountancy software (like Xero) can send automatic reminders for you.
(Fun fact: when I first started my firm, I didn’t want to do the chasing myself, so I invented a person named Belinda Billing to handle it. She had some lovely conversations with clients—but yes, it was really just me behind the scenes!)
4. Negotiate Supplier Terms
Look at your suppliers’ payment terms and see if you can negotiate them. For instance, if they originally need payment within 10 days, ask if you can pay within 30. I’m not suggesting you pay late – just see if they’re open to giving you more breathing room.
5. Offer Early Payment Discounts
Consider offering a small discount if people pay early. For example, the fee is £100 but, if they pay within seven days, it’s 2% off. You also see this a lot with software and subscription services, where paying annually upfront works out cheaper than paying monthly – “pay upfront and pay for 10 months instead of 12”. You might use this periodically in your business to bring some cash in.
6. Use Direct Debits
Getting customers on direct debit can simplify the payment process and put you in control. Platforms like GoCardless and Stripe make it easy to set this up. Yes – there is a cost (they take a small percentage) – but the reliability of being paid on time and not having to think about it can more than make up for it.
7. Manage Your Stock
If you’re a business that holds physical stock, managing it carefully is crucial. Consider if you can “drop ship” or otherwise avoid paying for a lot of stock up front. You don’t want to tie up precious cash in items that just sit on a shelf.
8. Have Cash Reserves
It’s obviously easier to manage your cash if you already have some! Having savings or a buffer for a rainy day can help you cover unexpected bills and take advantage of early payment discounts your suppliers might offer. It also saves you stressing about cash and lets you make better, clearer business decisions.
9. Look at Financing Options
If you’re struggling with cash flow, explore the financing options available to you. If you’re unsure, speak to an expert who can guide you toward the best fit for your situation.
Final Thoughts
Bringing all these tips together, the most important thing is to regularly review your finances and keep a close eye on your cash flow.
If you have any questions or would like any help with your cash flow, please hit “reply” or give us a ring on 0151 380 8084.
Many thanks
Jon