The number one cause of business failure is running out of cash. There are three things an SME needs to do to manage cash effectively:

1. Know what bills are due to paid – how much and when, ie a detailed forecast of cash out, at least for each week for the next 12 weeks – update this every week.
2. Know what invoices are due to be paid to you – how much and when. Chase any overdue invoices immediately and keep doing so. Create a detailed forecast of cash in, at least for each week for the next 12 weeks – update this every week.
3. Subtract cash in from cash out to show you a weekly profile of your cash position. Identify key risks, eg if a customer payment is not received on time.

Keep VAT and PAYE payments in a separate account and resist the temptation to spend from this account.

For more information on how to achieve optimum cash management, please call us.