Cash is the oxygen that keeps your business alive. If you want to grow sustainably, it’s essential to improve business cash flow, not just chase profit.
At Horsfield & Smith, we’ve worked with hundreds of businesses across Greater Manchester. One truth remains constant: profit alone won’t pay next month’s payroll. While your balance sheet might show assets and liabilities, it’s the movement of money through your accounts that determines your day-to-day financial health.
Let’s explore how to master your cash position while maintaining room to grow.
Why cash management matters more than you think
Many business owners focus solely on the bottom line but we’ve seen profitable companies collapse due to poor cash management.
Your cash flow statement tells the real story of your business’s viability. It tracks how amounts of money move in and out of your operations.
Consider these real-world scenarios:
- A £2m turnover manufacturer nearly folded because 90% of their revenue was tied up in 120-day payment terms, despite showing strong profits on paper.
- A thriving café chain couldn’t expand because seasonal dips drained their working capital reserves.
- A tech startup secured major contracts but couldn’t cover VAT bills due to poor cash flow forecasting.
These situations all demonstrate how managing cash differs from simply tracking profits and they are preventable with the right strategies.
Understand your cash position from multiple angles
Before you improve your cash flow, you must understand it from different perspectives.
We recommend examining:
- Your cash conversion cycle
How long does it take to turn inventory/services into actual amounts of money in your account? Most businesses we work with underestimate this by 30–50%. - Your cash runway
If income stopped tomorrow, how long could you operate? We recommend at least three months’ worth of essential outgoings as a buffer. - Your payment terms mismatch
Are you paying suppliers faster than clients pay you? This common trap can squeeze your working capital. - Your seasonal patterns
Nearly every business has cycles. Good cash flow forecasting helps you anticipate these needs before they become crises.
Our management reporting service helps clients gain clarity with custom dashboards that highlight risks before they become emergencies.
Five strategies to improve business cash flow
1. Rethink how you get paid
The most effective improvements often involve payment terms and systems:
- Implement milestone billing
Break payments into phases rather than waiting until project completion. One client reduced debtor days from 72 to 38. - Offer tiered payment options
Provide a 2% discount for 7-day payment, and add a premium for extended terms. This boosted on-time payments by 45% for one client. - Automate follow-ups
Tools like Xero or Chaser can cut late payments by up to 60% through systematic reminders.
2. Take strategic control of outgoings
We helped a retail client save £28,000 annually by:
- Renegotiating with their top 5 suppliers – saving 12% on costs.
- Switching to energy-efficient equipment.
- Consolidating 17 software subscriptions down to 5.
Key areas to review:
- Recurring expenses that have increased over time.
- Supplier contracts due for renegotiation.
- Discretionary spending that doesn’t drive revenue
3. Build dynamic forecasting systems
Traditional budgets don’t reflect modern business realities. Instead, consider:
- Rolling 13-week forecasts that adapt to changes.
- Scenario modelling for best/worst-case planning.
- Forecasts tied to real-time operational decisions.
One manufacturing client avoided a £75,000 shortfall by spotting a seasonal dip three months in advance – thanks to strong cash flow forecasting.
4. Optimise your tax position
Many businesses unknowingly lock away cash by:
- Overpaying VAT due to poor record-keeping.
- Making inefficient corporation tax payments.
- Missing R&D and capital allowances opportunities.
We helped one client unlock £42,000 in trapped funds through better tax planning.
5. Implement smart financing strategies
When used correctly, financing can fuel growth and preserve working capital:
- Invoice financing – Get up to 90% of unpaid invoices immediately.
- Asset financing – Acquire essential equipment without upfront outlay.
- Growth loans – Tailored to match your business cycle and improve cash flow.
When to seek professional guidance
Consider expert help if:
- You’re frequently managing cash shortages.
- Growth opportunities are lost due to lack of funds.
- Your financial position is unclear.
- Your net cash flow is consistently negative.
At Horsfield & Smith, our business advisory team creates tailored cash management solutions based on your specific situation.
Building long-term cash flow health
Sustainable cash flow requires both immediate action and long-term systems:
Daily/Weekly:
- Monitor bank balances.
- Track key metrics like debtor days.
- Update short-term forecasts.
Monthly:
- Review aged debtors reports
- Analyse cash flows: operating, investing, and financing
- Compare forecasts to actuals
Quarterly:
- Review customer payment behaviours.
- Reassess supplier terms.
- Evaluate new financing options.
Annually:
- Conduct a full cash flow health check.
- Plan major expenditures
- Reassess financing structures.
This layered approach helps manage short-term needs and long-term objectives simultaneously.
Your action plan to improve business cash flow
Improving your financial health doesn’t require complex accounting – just informed, consistent action.
Step 1: Analyse your current position
- Review the last 3 months’ bank statements.
- Calculate your cash conversion cycle.
- Identify your biggest bottlenecks.
Step 2: Implement quick wins
- Contact your top 5 slowest-paying customers.
- Re-negotiate 1–2 supplier contracts.
- Set up basic cash flow alerts.
Step 3: Build sustainable systems
- Establish regular cash flow forecasting.
- Implement payment automation
- Schedule a cash flow health check.
Step 4: Seek expert support
- Book a free 30-minute consultation with our team.
- Explore financing options before you need them.
- Develop a 12-month cash flow roadmap.
Final thoughts
Effective cash management isn’t about restriction. It’s about creating freedom:
- Freedom to pay staff on time.
- Freedom to invest in growth.
- Freedom from financial stress.
Contact Horsfield & Smith today to see how we can help improve your business cash flow. Together, we’ll build a business that thrives – not just survives.
