“Poor cash flow and late payments are responsible for 50, 000 small businesses closing each year” (Source: Accountex).


Cash flow is the essence of your business and the key to understanding your current position and to improving it through tactical changes. Not having complete knowledge of your cash flow creates a lack of clarity which leads to possible incorrect business decisions.  It is important to ensure you have a clear picture of your incoming and outgoing payments and their scheduled dates. Cash flow statements only include money going in and out of the business and anything purchased on credit is not included until it is paid.

This article will explore how cash flow is determined and the relevance of up to date records and daily bookkeeping. It then looks at how this impacts credit control, making payments and surviving the lean months. Finally analysing how this all comes together to make your life somewhat less stressful.


Cash flow analysis cannot simply be pulled together, at least not if you value accuracy. This article will go through the basic process of preparing a cash flow. The starting point is a trial balance which is a detailed summary of all nominal accounts, split into a debits and credits. All bookkeeping is based on a double entry system ensuring that debits and credit match, hence the name “trial balance”. If this balances, we can be mostly confident that all our ledgers are correct allowing us to proceed.

With this complete a profit and loss (P&L) statement is then drawn up displaying your revenue and expenses. Assets, liabilities, drawings, and owner’s equity do not affect profit and so are not included in this statement.

The last stage before the actual cash flow is the balance sheet which is prepared to display your assets, liabilities and owner’s equity.  These are the components that were missing from the P&L.  This displays the equation owner’s equity = assets – liabilities and it is important that both sides of this equation balance.

Once this is all prepared cash flow can then be considered. A cash flow statement then shows how the business used its cash during the year. It aims to show the change in a business’ bank balance. Cash flow differentiates from P&L as it only relates to cash transactions and entries such as depreciation are not included.


Ensuring that all bank feeds are set up correctly provides current information with assurances of its accuracy. Bank transactions are pushed into your software directly from your bank or credit card accounts.  This cuts down any potential errors in manual data posting. Analysis of this data is then swift and up to date ensuring that decisions are made with the best information available.

Receipt Bank makes passing receipts to your adviser simple with various methods, none of which involve collecting a box of paper. Supplier rules can be set up to ensure consistency of postings. It will then prepare an entry ready to be reviewed before publishing into your software with an image of the original documentation. Once in your software, planned payment dates can be agreed.  This gives clarity as to the value of scheduled outgoing payments each day, week or month based on these dates.  It is best to avoid making daily payments, using batch payments to suppliers either weekly or ideally fortnightly or monthly. This with daily bookkeeping will provide an insight as to when you are being paid and subsequently can pay suppliers.


Careful observation of your debtors through up to date records helps to ensure two things. Firstly, it encourages clients to pay you on time or enable you to set up payment schedules. Secondly, it ensures you are not chasing clients unnecessarily adding to the stress of the current situation.

A good adviser can help by ensuring accurate statements are emailed to your clients promptly. With friendly follow ups and reminders both before and after the due date. Given the economic environment,  some clients  may struggle paying debts in one go and a payment plan may be necessary.  Again, your advisers could help negotiate payment terms that suit both parties.  Thanks to technology it is possible to keep an eye on your clients’ credit ratings and alert you to any potential issues.


A good cash flow analysis will enable you to plan when you make payments based on when you have money coming in. Ensuring these align properly means you will optimise the efficiency with which you pay bills with the money available. This aids in maintaining good supplier relationships with the added benefit of protecting your credit rating. A good adviser can help by processing invoices for you and scheduling payments based on your incoming cash. They should warn you should payment plans need to be set up and then help you to ensure they are.


We all know that there can be a lag between sales and receiving payments. Bills are not going to disappear or change due dates because you currently do not have the cash to pay. In an ideal world, you would have enough of a cash “cushion” to get you through lean months. This can then be used to tide you over and replaced when you receive payment from your clients. You should review your cash flow history and ideally save a “cushion” to cover your business for three to six months.

Just knowing those numbers can help you paint a better picture and, thus, make better business decisions. Overdrafts can also support this but is not recommended as a long-term strategy. It is easier to arrange an overdraft when you are flush than to put this in place when you are not.

Communication is key, keeping your creditors informed of when you will be able to make payments. Supplies may prefer smaller payments towards their invoices, if possible, as opposed to receiving nothing at all.


Saving the best for last what does all this do for you…. It reduces your stress or at least some of it. Understanding your cash position helps to foresee any issues and best strategise payments. Not having this stress means you can focus on the million other task on your to do list.

On a deeper level having an expert reviewing your cash flow will give you access to advice, knowledge, and solutions others will not think of. This not only takes task from you to do list but means the task is done by someone who specialises in financial matters.


Cash flow management is vital to any business as it helps you understand your position. Helping to visualise incoming and outgoing of the business and plan accordingly. This will help limit your team’s workload and give additional insight.

Key points to takeaway:

-Cash flow is the end of a process not the beginning.

-Up to date records utilising the latest technologies helps to assure accuracy.

-Understanding your incoming payments is vital for planning outgoings.

-Good communication with suppliers and customers is vital to ensure due dates are kept or adjusted.

-Knowledge of your cash flow can be a route to give you peace of mind and a good adviser will further lower your stress levels!

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