Managing your cash flow involves understanding upcoming expenses and comparing them against accounts receivable and future sales. In short, it's keeping track of the money coming in and out of your business and understanding how much revenue and expenses you have.
According to The Guardian, a fifth of UK small businesses are at risk of collapsing within the next month as they struggle to secure emergency cash meant to support them through the coronavirus lockdown. Keeping your capital balance running smoothly is now more important than ever, if you want to ensure the health of your businesses.
To help you effectively manage your finances during this time, Think Business Loans have compiled a list of tips to help your business analyse its cashflow.
Projecting your Cashflow
To successfully plan your budget, you’ll need to determine when you’ll receive and spend your money. Start by looking at your previous years 1accounts to help plan the basis of cashflow for the following year.
The Covid-19 epidemic has seen several businesses close due to lack of available suppliers. However, projecting your cashflow can be a great way to avoid closure, by adjusting your company spend and seeking out new suppliers for short term relief.
Understanding your Cashflow statement
The main purpose of examining your businesses cashflow is to ensure that your revenue is keeping up with your profits. If your business is making sales, but struggling to pay its bills, you’ll see a decline in net cashflows.
Its important to look out for
- If the cash from operating activities continues to be larger than your net income, the revenue will be labelled ‘high quality’.
- If your net income is larger than the cash from operating activities, further analysis will need conducting to reveal why your net income is not transferring into cash.
- If your business is consistently generating more cash than it uses, you’re in a strong position to increase dividends. This means that your business is showing signs of good financial health, which will allow you to buy back stock and expand.
Seek a cash injection
Unfortunately, the coronavirus has meant many businesses have had to close due to new isolation and social distancing restrictions, which might mean your sales are unable to bring in a steady income.
At [brandin=name], we specialise in providing business interruption loans for SMEs struggling due to the coronavirus. Our team aims to package up your application so you can receive the funding you need to navigate your way through the crisis.
Our team are working with the banks and alternative lenders to help support SMEs across the UK to help prevent the closure of businesses.
If you would like more information on the financial support available to you, get in touch with our lending experts today on 0203 880 9880.
Jessica Court graduated from the University of Portsmouth in 2017 with a bachelor’s degree in Media Studies. She has previously worked within the In... Explore Author