Cashflow management is a critical aspect of running a business. With the advent of digital technologies, there are now more tools and options than ever to help you manage your finances.

Keeping on top of your cashflow is even more important during tough economic times.

With a global economic slowdown in the forecast, energy prices soaring, and supply chains still facing challenges, cash is likely to be tight over the coming year and beyond. Cloud technology and fintech apps can give your business the best possible control over your cash.

Why is cashflow so important?

To keep your business operating, you need enough money coming into the business to cover your outgoings – with enough surplus cash to deliver a profit. When recession begins to hit, this can have a significant impact on your income.

Consumers will have less disposable income to spend on your products and services. Business customers will be looking to reign in their spending on suppliers. As a net result, your business is likely to make fewer sales and will bring in smaller revenues.

This can mean the following with proper business tax and planning advice:

• Reduced income coming into the business
• Less cash in the business to cover your operational expenses
• Not enough money in the bank to pay suppliers, utility providers or payroll costs
• In the worst-case scenario, insufficient cashflow for you to cover an emergency.

Benefits of digitised cashflow management

Digitising your cashflow management is a strategic move for businesses looking to modernize their accounting processes and stay ahead of the game. By digitizing your cashflow management, you can improve your financial operations’ efficiency, accuracy, and transparency.

With a digital solution, you can automate many accounting processes, such as invoicing and bill payment, and easily track and monitor your cash flow in real time. This can help you make informed decisions about spending and investing and better understand your financial position.

Furthermore, using cloud-based accounting software eliminates the need for manual data entry, reducing the risk of errors and freeing up time for you to focus on other aspects of your business.

Additionally, cloud-based solutions provide automatic updates and backups, ensuring that your financial data is always secure and up-to-date. Overall, digitizing your cash flow management can offer numerous benefits to businesses, making it an investment well worth considering.

This is ideal for business that have strong cashflow management practices in place or work with a bookkeeping service. Otherwise, the automation, set-and-forget-it nature of digitised solutions can be detrimental to businesses that aren’t working with professionals.

What can you do to improve your cashflow situation?

The more informed you are about your cash position, the more you can do to prepare for any cashflow gaps. It’s this foresight that can make all the difference when you’re battling against tough external economic forces and a downturn in sales.

If you want to safeguard your cashflow, these are some sensible steps to take:

• Switch to cloud accounting – accounting and finance technology has moved on in leaps and bounds in the past decade. The latest crop of cloud accounting platforms all offer a detailed reporting of your cash position. These software tools will generally offer real-time data, giving you up to date cash numbers.
• Integrate with cashflow forecasting apps – cloud accounting platforms let you add third party apps to create a custom app stack of helpful business tools. There are plenty of cashflow forecasting apps to choose from, giving you the ability to predict your future cashflow position.
• Plan ahead for the cashflow gaps – when your forecast shows a shortfall of cash coming up, that’s the time to take evasive action. If you can see that there’s a cash hole approaching next month, it’s time to look at ways of raising extra finance to fill that hole. That could mean extending your bank overdraft, taking out a small business loan or taking out an invoice finance facility with a lender. Business advisors can help navigate these times when a clear solution may not be apparent.
• Look for opportunities to cut your overheads – one way to even up your cashflow is to cut down on your expenditure. If you can cut back on overheads, expenses and unnecessary costs, this can help you re-balance your cash position, even when cashflow is getting tight. Look for cheaper suppliers, buy in smaller quantities and take every opportunity to cut costs and keep your spending more sensible.
• Update your prices and your sales strategy – raising your prices is one way to bring in more cash with the same volume of sales. But it’s a balancing act. Putting your prices up can alienate existing customers and could see you losing customers, but if you can find the sweet spot for your pricing AND also drum up more sales, you can quickly increase revenue and give your cash inflows a healthy boost.
• Review your cashflow reports regularly – it’s important to look at your cashflow numbers and reporting regularly, not just at period-end. This is particularly important when economic times are tough. With the most current cash information to hand, you can make informed business decisions and aim to keep the business operational.

Talk to us about updating your cashflow management processes

With your business in a healthy cashflow position, you give yourself some solid financial foundations for riding out the global recession. No business is invulnerable in these conditions, but with liquid cash in the business, you have more flexibility and more capital to play with.

Book a meeting and let’s see how we can improve, update and digitise your cashflow management processes.