Skip to main content

Why do I have a poor cashflow and how can I improve it?

Desperate times asks for desperate measures…unless you plan better and then the measures are smart. 

Having a poor cash flow means you don’t have sufficient income to cover all your expenses. The pandemic and rising inflation emphasised the need to reassess the way we do business and  plan better for any unexpected changes. But what do you need to consider?


Do you have an inventory plan?

Holding too much stock ties up cash which can be used elsewhere, but you also need to have enough stock to meet the demand. Therefore, having the optimal amount of stock can be key in improving your cash flow. 

Current circumstances highlights even more the importance of having a process in place to identify the stock items that are critical to your business and build an inventory plan which considers potential risks due to unforeseen circumstances (such as Covid 19, rising inflation, etc,). Are you taking these risks into account?

When was the last time you analysed your customer portfolio? 

The vast majority of businesses have been hit by the pandemic, and yes some of the customers might not be able to pay you at all. This is why you need to identify the accounts in your portfolio that may encounter further liquidity problems due to Covid-19. 

By assessing and categorising your customer portfolio, you can improve your collection strategy and where possible renegotiate the payment terms or introducing payment in instalments.


Have you considered negotiating payment terms with your suppliers? 

The vast majority of suppliers have standard terms that their clients don’t bother to negotiate. But, in these difficult times in particular, it’s worth studying them. 

However, it can be time consuming to try to negotiate with every supplier. Instead, you could identify the companies you spend most monies with as this will give you a better position to negotiate or even look for an alternative one which can give you a better deal.

This is a good time to consider if you can negotiate a better deal for yourself, with more time before you have to make a part or full payment.


Are you aware of you upcoming tax liabilities and can you pay?

If you are experiencing cash flow problems and have fallen into arrears you can negotiate a Time to Pay (TTP) arrangement with HMRC in order to pay the outstanding tax bills in instalments.

It can be used for  Corporation Tax, VAT and PAYE arrears, but also when directors anticipate cash flow problems with upcoming payments and it may help the company to avoid a late payment penalty if they miss the deadline.

However, HMRC will consider every arrangement on an individual basis and will also consider the company’s history of tax repayment. This is to ensure  that directors are not deliberately trying to avoid meeting their tax obligations. 

Lastly, speak to your accountant

Now more than ever you need that extra pair of eyes to understand what is really going on in your business and help you plan for any unexpected changes. 

Vision Accountants can review your every transaction, which means you will have access to  information to measure how your business is going in real-time rather than waiting until the end of the financial year.

What are the benefits of monthly management accounts? (why should I do it?)

  1. Gain more control over what's happening in your business
    • You will be able to clearly see your costs, where money is being spent and whether it’s worthwhile. It will allow you to make more informed decisions about the money you spend.
    • Your monthly cash flow statement can show you the reality of when cash comes in and goes out. It helps you plan your expenditure more effectively and enables you to take steps to bring cash in more quickly.
  2. Plan for growth
    • You might be seeking finance or investment to grow. Robust monthly management accounts can reassure banks and investors that you have a firm grasp of your business.
    • Are your plans on track? Were you too ambitious or not ambitious enough? Comparing budgets and forecasts can help you assess these. In addition, these can be shared with your internal team and get them on board with your plans.
  3. Stronger position for year-end
    • If you track the numbers through the year you won’t find yourself in a position of looking at the figures and wondering what went wrong. At the same time, you won't be celebrating an unexpectedly good year while simultaneously worrying about how you’re going to pay the resulting corporation tax bill.

Vision Accountants Logo

About the author

About Vision Accountants

Vision Accountants specialise in prompt, tailored, proactive and human-centred support to meet the challenges of running and growing a business.

Get in touch

We can be next to you, every step of your journey, to meet your changing needs

This site uses cookies. By continuing to browse you are agreeing to our use of cookies. Click here to learn more about our cookie policy.