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Conquering cashflow

How mastering cashflow management can help boost your business and give you peace of mind

From a 7-step plan to useful tips and resources, here’s how to stay on top of your cashflow.

Take control of your cashflow

Whether your business is meeting the needs of consumers or other businesses, its  cashflow can be affected  by a wide range of factors. While some will be outside of your control, there are steps you can take to protect and enhance your cashflow.

If all is going smoothly, then thinking about this may not be a priority, but just taking a few minutes could help make sure you’ve enough resources to meet day-to-day commitments and invest for the future.

Understanding key drivers, planning and responding quickly can all help protect and strengthen your business. To help you consider options for improving your cashflow, we’ve put together a package of practical tools. Click on the tabs below for our 7-step plan, FAQs and top tips from a broker.

  • Your 7-step plan

    1. Create a forecast

    While no-one really knows what the future holds, it's better to plan based on your best estimate than to not plan at all. Taking time to forecast, considering factors that may influence sales over time, could enhance credibility with your bank or investors if you seek external financing. When forecasting cashflow, pay attention to when costs fall to help with managing intra-month fluctuations. Read our article on how a good forecast can help you achieve steady growth and stay strong when times are tough.

    2. Anticipate the unexpected

    Consider a range of possible scenarios including what impact it would have if sales exceed or fall short of forecast expectations. This could be due to a change in demand or issues affecting your supply chain. “Small businesses should check regularly that their most important customers are not at risk of failure,” says the Federation of Small Businesses (FSB). 

    3. Monitor cashflow carefully

    Compare your forecasts against actual performance over time. If your projections weren’t realistic, think about how you can improve next time based on what you’ve learned during the process. Regularly review expenses to ensure they are all needed and are remaining good value for money. 

    4. Invoice quickly 

    Get your invoices issued as soon as possible in your customers' required format, to give your business the best chance of getting paid on time. The Barclays app1 provides a way of issuing simple digital invoices on the go, even before you’ve left a client’s premises. 

    5. Manage late payments

    • Understand your customers: The point at which your customers settle their bills makes a huge difference to your cashflow, so drill down into the payment cycles and processes of your customers. Build your cashflow forecasts on the basis of your customers’ payment terms and track record. Look for payment options which help make it easy for your customers to pay you quickly, such as online or contactless payments. You can find out more about payment options here
    • Be disciplined: Have processes in place for tracking invoices and chasing late payments. Your firm may be big enough to employ specialist finance staff with credit control skills or you may be able to employ a bookkeeper to help. If you’re handling this task yourself, understand that different strategies may be more effective with different customers – some may respond to a friendly approach, while others will need a tougher line. If your terms say ‘interest will be charged’, follow up on it. This could help to trigger payment.
    • Get support: There is help available to businesses struggling with late payments. The Small Business Commissioner publishes lots of useful tips and advice on how to get bills paid on time, as well as how to chase down late and unpaid invoices.

    Read our article for more information on where you can find free support and advice from professional organisations that can help busineses in financial difficulty.

    6. Secure funding ahead of time

    An arranged overdraft or a Barclaycard business credit card2 can provide valuable headroom to utilise as and when you need it, as well as peace of mind in case customers are late paying, but bear in mind that you may be charged interest on your borrowing. Talk to us to find out more about what funding options are available to you or find out more here

    Paying your bills on time helps to maintain a positive business credit rating. However, if you regularly go overdrawn without an arranged limit it can adversely affect your credit score. Always try and plan ahead and talk to your bank about the options in plenty of time so it doesn’t affect your business. 

    7. Ask for advice and act early 

    Get in touch with your bank and accountant for support as soon as possible if you have any cashflow concerns. They can help you consider options appropriate to your circumstances. “Early communication is key,” says the Federation of Small Business. Don’t let things drift, as your business credit rating may be impacted and the number of options typically decreases as a business becomes more cash constrained.

    Find out more ways to improve your cashflow.


  • Cashflow FAQs answered

    Lending is often taken out to fund working capital, but what this looks like in practice can vary significantly from business to business. Understanding how it works can help with forecasting cashflow and ensuring you secure the right level of funding to support your future plans.

    What is working capital?

    Capital is often used to describe money invested in something. Shareholders expect to receive a return on investment capital over a long period of time, so would expect their money to be used on larger assets or those enabling a business to grow long-term. Working capital on the other hand is the money put to work in running a business. It’s what’s invested in short-term assets (also known as current assets), less money you owe for goods or services you’ve bought, and short term borrowing such as an overdraft (also known as current liabilities).

    Why do businesses need working capital funding?

    The most common short-term assets are stock and debtors and it is important to understand how much cash is tied up in these when applying for funding. 

    When buying stock, you expect to sell it on for a profit, often after adding value to it in some way. If your customer doesn’t pay for it straight away, but is allowed to pay after receiving an invoice then during that period they owe you and become your debtor. Money owed to you is also a business asset, like stock, which all being well will be convertible into cash in the near future. 

    Why don’t profits always translate into positive cashflow?

    The amount of cash tied up in working capital will depend on the way you trade with your customers and suppliers. If a business has to pay for stock before it receives payment from it’s customers then it will often need additional funding to grow, without running into cashflow challenges. Also, if loans or hire purchase are being repaid at a much faster rate than the assets they financed are depreciating, then this can also cause challenges.

    How do I encourage debtors to pay on time?

    Wherever possible, try not to become too dependent on one customer so that an issue like a late payment doesn’t cause significant difficulties. In the UK, a third of payments to small businesses are late and 20% have run in to cash flow problems due to late payments3. The office of the Small Business Commissioner was recently launched to ensure fair practices for Britain’s small businesses, and support them in resolving their payment disputes. They have created 10 top tips to help get your invoices paid on time.

    How can I monitor cash tied up in working capital?

    As an alternative to looking at changes in stock, debtors and creditors on a Balance Sheet, many accounting packages will enable you to view a Funds Flow or Cash Flow statement. Many also have forecasting tools that can help you think about how changes in sales and profitability could impact on your balance sheet and cashflow. If you would like to discuss how changes in your business may be impacting working capital and discuss funding options, please call our Business Lending Team on 0333 202 74304.

    What options are there for financing seasonal cashflow?

    As loans require regular repayments, more flexible options are typically better for short-term or seasonal funding needs. An overdraft can provide headroom during seasonally quieter periods, Barclays provide a range of Business credit card options2, and we now also offer flexible invoice finance solutions through an innovative partnership with MarketInvoice5. Our Business Lending Team will talk you through the options and help you choose what’s right for your business6

  • A finance broker's tips

    How do businesses become more resilient in an uncertain market environment that can play havoc with their cashflow? Simple, says Henry Ejdelbaum, Managing Director of ASC Finance for Business, a broker that specialises in helping businesses secure finance. “There are only two causes of cashflow problems,” he explains. “The money is coming in too slow, or it’s going out too fast.”

    The root of the problem

    Of course, it’s not quite so simple given that the drivers of slow sales and fast spending can be complex. In the current economic climate, where wages and prices are rising more quickly, many businesses are facing higher costs. At the same time, they are having to cope with customers tackling pressures of their own, who want to hang on to their money for longer and therefore pay bills later. And while many businesses are managing to grow, this brings its own cashflow problems, as they wait for new orders to translate into revenues.

    Good management

    Nevertheless, the fundamental lesson here rings true. “Too many businesses aren’t on top of cashflow management,” says Henry. “Financial management should be rigorous and ongoing.”

    The secret to good cashflow management is careful analysis and planning. Businesses with a detailed and realistic understanding of when their costs fall due and when they can expect to book sales will have a much better chance of anticipating cashflow difficulties.

    Flexible funding

    Armed with that knowledge, it should be much easier to plan funding of the working capital cycle on a continuing basis, including ensuring the right facilities are in place to cope with any difficulties. 

    It’s important to consider a wide range of funding options for working capital, advises Henry. “We very rarely see small businesses depending purely on bank overdrafts these days,” he says. “You need to be more imaginative: options such as asset finance and invoice finance can give increased flexibility.”

    Faster payments

    Even some quite simple tricks can accelerate the working capital cycle. Making sure invoicing is done promptly, with payment terms made clear, can encourage customers to settle their bills speedily. 

    If it’s not currently easy for customers to pay, through BACS transfers or by credit card, for example, it’s important to put this right. And if a business knows its cashflow is particularly exposed to a single large customer, they should plan ahead for this, so that a delay doesn’t catch them out.

    Take action

    If a business does run into cashflow problems, it’s key for them to seek help at the earliest opportunity, adds Henry. “Once you start running out of money, the funding options available can close down very quickly,” he warns. “It’s vital that businesses don’t bury their heads in the sand but talk to advisers or the bank at the first sign of trouble.”

    For most businesses, there will be help available; and there is now a wider range of funding options available to businesses than ever before. Visit Barclays for intermediaries for useful articles and practical tips to help you and your clients develop and grow. 

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