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How to increase cashflow for your business

10th November 2021 Print

The pandemic has had serious consequences on the operations of businesses in the UK, both short- and long-term. One of the major affected components to businesses whose trade was affected by coronavirus is cashflow, which can have serious ramifications if unchecked and unaddressed. But what is cashflow, and why is it important for you to increase it?

What is Cashflow?

Cashflow is a simple concept, essentially referring to a given company’s incoming and outgoing cash at a given time. Any business sales and revenues, returns on investment or credit agreements with regard to a service or product are treated as income, where business expenses and overheads are outgoings. These more or less encompass the movement of money in and out of your business, an important metric for business owners and shareholders alike. Generally speaking, cashflow needs to be positive (that is, income larger than outgoings) for a sustained period to inspire confidence in the business and its strategy.

What Can Diminish Cashflow?

There are many factors that can affect a business’ cashflow from month to month. The most common cause of diminished cashflow in successful businesses owes to the seasonal nature of that business – for a particularly extreme example, a company which sells and distributes Christmas ornaments will see a stark difference between their March revenue and their November revenue, with cashflow significantly diminished for all but the festive season of the year. Cashflow can also be affected by late payments from customers or clients, but perhaps more negatively be premature growth, increasing expenditure on the business without seeing a sympathetic increase in revenue.

How to Increase Cashflow

Increasing cashflow is not as simple as making a single change, but there are many ways in which you can positively influence it. Start by looking at your business expenses; is there anything you can cut or reduce? Maybe an energy supplier can offer you a better deal, bringing down overheads – or maybe your office supply company is charging over the odds. Next, look at your payment processes. Is it easy for your customers and clients to pay, and could it be easier? Consider utilising an online banking platform to streamline revenue. You could also consider applying for a business loan, to give your business a short-term cash injection.

Benefits of Increasing Cashflow

Being able to demonstrate sustained positive cashflow can have serious benefits for your company. Shareholders will be satisfied by the proof that your business is sustainable, and new investors can be secured by that same token, allowing you to continue to grow your company. Keeping cashflow in mind as your business continues to trade also gives you a good idea of its performance, and can inform you on potential future strategies and models.