During these uncertain times having an accurate understanding of your cash position both now and in the near future is vital to all businesses. You may have chosen to defer liabilities such at rent and loan repayments or entered into a time to pay arrangement with HMRC which means there may be large liabilities due at unusual times.
It is fairly simple to prepare a daily 12 week cashflow forecast using a spreadsheet which details expected receipts and payments however in order to do this you need to have accurate data available about who owes you money, how much you owe your suppliers and your expected income and expenditure over the 12 week period. If your current accounting system does not provide this data then it may be a good time to look at alternatives.
Simple ideas to help maintain a healthy cash balance are:
- Keep in touch with customers so you can quantify the amounts and timing of payments
- incentivise early payment from customers
- Ensure invoices for all work done are issued timely
- For any new orders, ask for payment in advance or a deposit
- Negotiate discounts with suppliers for early payment
- Access government financial assistance such as the Coronavirus Job Retention Scheme, grants and R&D tax credits
- Review cashflow forecasts regularly and compare actual performance to your forecast
The Tax Partnership can help with the set up and monitoring of your forecasts and analyse trends within your business to suggest improvements to optimise your profits and to secure a healthy cash balance.