Recent data from the Federation of Small Businesses found that 60% of external finance supplied to the UK’s small businesses is used to manage cash flow. Maintaining a smooth cash flow is a very real and very prevalent problem for many entrepreneurs.

But just because your business struggles to keep an even keel on its cash flow, doesn’t mean it’s not successful. You can have a great product, strong unit economics and a full order book, and still struggle with cash flow. We all know the pain of spending money on a project up front to then wait months before you get paid for the work.

Large blue-chips and high-street retailers are often some of the worst payers – large orders and big-name debtors can put a huge strain on cash flow, even when business is good.

Below you’ll find some tips to help your business and its cash flow. Some are simply changing the way you work, whilst others require a fundamental change in ops – either way, I’ve tried to include the small, quick-win tips any entrepreneur can follow to help combat the cash flow woes.

Treat others as you would have them treat you

Yes, this is business, and it’s no time to go soft – but promoting a culture of prompt payment in your company will rub off on your customers and debtors alike. Building a reputation for being a trusted, reliable debtor will do you favours in the long run. Keeping an immaculate record will also give you much more leverage for negotiating terms, with both current and future clients.

Keeping good relations is good business, despite what you might watch on The Apprentice

Time is money

There are some relations in business that will simply never be mutual. Large companies can bully SMEs into payment terms they can’t challenge. In this situation, do what you can – be prompt with your invoicing. Don’t slack off – any errors or delays will simply give your debtors another excuse. A single mistake can get caught up in the corporate sprawl for weeks, so do your checks and stay on-time.

The future is now

Tech-powered business tools are changing the way entrepreneurs run their company. From cloud accountancy software to e-commerce payment services, it seems like there’s an app for just about anything business related. You can help manage your cash flow by using a well-established bookkeeping platform like Xero.

Using this kind of software will open up other tools as well, like Chaser for keeping on top of debtors, or Float for forecasting cash flow. No need for that Excel spreadsheet any more, or even that pen & paper ledger – this software keeps all your accounts up to date and in sync.

A bird in the hand, two in the bush

Making payments on future sales is always a risk. When it works, it helps – but it’s an unhealthy habit to get into. Don’t include your incoming payments into your working capital reserve – wait till it’s banked. This might seem obvious, but you’ll be 100% clear exactly how much liquid cash your business has to hand.

Make sure the money is in before you spend it

There’s always another way

Overdrafts are the go-to solution for cash flow finance. It’s a tried and tested facility for businesses looking to fill that funding gap. However, banks have grown increasingly reluctant to offer new overdrafts in recent years, and it’s not always the most efficient form of finance.

Factoring is a more direct solution, but it’s a huge hit to the sales ledger of any business and full of costly fees. New alternative forms of business finance are now available. Invoice finance, something we specialise in, is particularly effective for cash flow troubles, allowing businesses to selectively unlock the capital tied up in their unpaid receivables.