By Angela-Marie Graham (FCCA) Finance Director at Practical CFO

For many of our clients, cash is a major concern. So, we at Practical CFO [1] put our heads together and compiled the following practical ways to manage your cashflow:

• Get organised with dates
  Forecast your cash in and out flows daily for a minimum of the next 30 days (90 days is even better). The more you know about the payments you have to make, and the cash you may or may not receive, the more warning you will have of cash flow tight spots.
• Don't forget to add the statutory payments such as PAYE and VAT. Knowing your future cash position will allow you to take early corrective action. There is nothing worse than knowing that there is no money in the bank to pay the wages when it is too late to do anything about it.

Create a robust process for payment

• Add an up-front deposit and staged payments to your contract's terms. An installer client of ours realised that they paid for all materials and subcontract labour before they'd even invoiced their client let alone got paid! We helped change some of those contracts but also improved processes so that the client could borrow against part completed work.
• Pay your suppliers once a month (particularly overheads), and only pay those that are due or overdue. It won't hurt your relationship if your supplier knows that you always do a payment run on the last day of the month. They'll be able manage their cashflow, and you'll have a chance to get cash from your customers before paying your suppliers.
• Minimise the number of suppliers you pay by direct debit. Admittedly there is nothing you can do about the credit card repayments or bank charges (and they always make sure they get paid, don't they) but do you really need to have a direct debit for your business rates or utility bills? Give yourself as much flexibility as possible when it comes to making payments.
• Pay for large capital items via a lease or a loan. Using debt means you can spread the cash impact over months or years. Keep an eye on interest rates, shop around for the best deals, and beware of the tanned photocopier salesman bearing paper gifts...

Build relationships with your customers

• Chase your overdue invoices promptly and get closer to the purchase ledger staff in your customer's business.
  The more they know and like you, the more likely they are to put your invoice in the next payment run and even add you to the list when their own cash flow is tight. Build a relationship and, if you need to, keep notes about their children, pets, football club or past-times. Asking about Tiddle's last visit to the vet will - literally - pay you dividends.

Practical CFO [2] work closely at board and management level to create an established finance function in a business, through transformation management, stakeholder management and strategy development, alongside key financial reporting and analysis. To get help managing your cashflow and building an effective business strategy, contact the PCFO team for information