Managing a business when economic conditions are tough

    Keep your cashflow healthy

    Cashflow is the balance of money entering and leaving a business. At all times you need to know how much money your business has in the bank, how much it owes and how much it is owed. Regularly updating your financial records enables you to do this.

    Many businesses overcome short-term cashflow difficulties. Often these problems can be anticipated, which means solutions can be found before the problem is urgent.

    The importance of cashflow forecasts

    Forecasts showing likely sales, profit and loss, enable you to identify when additional funds might be required. Then you have time to make necessary provisions, for example, by arranging a bank loan or overdraft extension to get you through periods of difficulty.

    Practical steps to maintain healthy cashflow include: reducing stock, minimising costs, maximising sales volume and margins, avoiding overtrading (ie taking on work you cannot fulfil to price), recovering debt through invoice discounting and factoring, renegotiating credit arrangements and selling off assets.