We’ve all heard the term ‘Cash is King’ and know that without cash a business cannot survive for long. Chiltern Business Connections member Andrew Leggett, Manager at Wilkins Kennedy High Wycombe, shares his top ten tips for keeping a business financially on track with its day to day finances. Have a read and see if there is anything that you could be doing to improve your business finances:
Firstly, watch out for key payment dates for things like PAYE/VAT. Create an Outlook reminder to ensure you have enough funds to cover these essentials.
Keep a daily/weekly check online of bank balances so that you don’t get any unpleasant surprises. You can easily set up low balance alerts on many accounts these days which will let you know should funds go below the necessary level for your outgoings, before you incur bank charges or run into an overdraft.
In many cases, it makes sense to only pay suppliers when invoices fall due, unless early payment discounts apply; although as a good local business investing in other local businesses, you may well decide to pay a bit earlier when the service provider is a micro business – you don’t have too, however it can be good to encourage local suppliers who will look more generously at you when quoting for further work.
It’s good practice to draw up a contract for services with payment terms included at the start of a project so that it’s clear from the outset what you are expecting to provide and receive.
Put in place a simple system to track orders which will ensure customer requirements are met and avoid any issues or challenges down the line. The system can be something as simple as a spreadsheet or there are also a number of free to use on line systems which are suitable for small businesses.
As soon as work is completed, invoice but also make sure all details on the invoice are correct so that there is no genuine reason for it to be rejected or queried. It’s a good idea to put a note on the invoice which states a time limit for queries to be raised, for instance – ‘Any queries regarding this invoice must be raised within 7 days of issue.’ This prevents businesses hanging onto invoices for a month and then querying something which means it’s potentially yet another month before you get paid. Systems such as Xero and Quickbooks can be used to track projects and issue invoices very efficiently.
Should there a dispute raised on an invoice, ensure this is resolved before the payment due date.
Don’t assume your existing deal on overdraft facilities is still the best option; things change frequently and it’s worth having an ongoing review or comparison at regular intervals.
Look at reducing your overheads and in particular consider energy efficiency to reduce costs; there are many deals on offer these days and also grants to help upgrade older lighting and boiler facilities to more efficient ones.
And finally, always retain sufficient reserves to cover two to three months of trading so that you aren’t always chasing those few late payments that slip through and so that you have breathing space for working capital.
Andrew Leggett at Wilkins Kennedy is a highly experienced accountant who has shared many useful financial tips with the members at CBC over the years – just one of the benefits of belonging to such a long-established local business networking group. If you’d like to know, please get in touch via our contact page.