Business cash flow

As money goes out of your business earlier and faster than it comes in, it’s easy to see how your business can fall short of funds while you’re trying to grow. Making sure this doesn’t happen can be tricky, but there are some easy-to-understand best practices you can use to get a handle on your cash flow.
Business cash flow

Our survey of SME owners in 2017 showed that managing cash flow is one of the biggest challenges when growing a business.

Staying on top of the timing cycle between paying your suppliers, holding your goods and then getting paid by your customers is crucial. This is where using a monthly, or even weekly, cash flow plan comes in. It’ll allow you to find any areas where cash is getting stretched, so you can take action sooner and meet your business’s demands.

Cash flow planning can go a long way to making sure the growth of your business doesn’t use up more cash than you can easily get hold of by increasing debt.

Creating a cash flow plan

So what should you include in your cash flow plan?

Put simply, it needs to show the cash coming in and the cash going out. It’s important to record when the cash is actually received, to get an accurate picture of your position on a monthly or weekly basis.

It helps to break down your plan into sections like these:

Cash in
  • Cash income from customer sales
  • Collection of money you’re owed
  • (e.g. if you give an important client longer to pay you than at point of sale)
  • Sale of assets
  • Tax refunds
Cash out
  • Overheads including rent and bills
  • Cost of goods
  • Staffing costs
  • Marketing costs
  • Loan payments
  • Shareholder dividends
  • Purchase of assets
  • Other costs (e.g. cost of vehicles, legal and accounting, insurance etc.)

Sourcing extra funding

If your cash flow plan is showing that you are going to need extra cash to cover a shortfall, it’s best to be prepared and look into where you can get it. To make it easier, we’ve provided an overview of some of your options.

Take out a business loan

This can be a quick and easy way to help provide your business with the boost it needs to grow. You can agree a set amount with your lender and work out a structured repayment plan so you’ll know how much you’ll be repaying each month. It’s important to use a lender which suits your business needs.

For instance, if you get a quote for an unsecured business loan with Esme, you can see exactly how much you’ll pay for the amount and term you choose. The application only takes 10 minutes and there are no early repayment charges for any amount; helpful if you want to pay it off all at once, or reduce the next month’s repayment.

Find out more    Eligibility Criteria

Government schemes

Depending on your business needs, there are various government lending initiatives available to you. The government website is a great place to find out what these are and check if you’re eligible.

Crowdfunding

This is when large numbers of people each put in a small amount of money to your business. Typically done online, you set up a donation page through a crowdfunding platform and get donations through it. To be successful at crowdfunding, you need to pitch your business effectively. We’d recommend sticking to a three-part structure: compelling summary of your business, explaining why you need the funding, and how the money will be used.

There are a number of platforms available to businesses so make sure to pay attention to the costs as well as terms and conditions when you choose one.

Selling shares to investors

By selling equity in your business you can bring in a significant amount of cash, but you need to bear in mind you’re giving away a portion of your business (and associated profits!). You’ll also hear this described as equity finance and means you pay out dividends to your investors. Because of this, it’s really important to do your research on who to sell equity to and be clear on the terms of the sale. Think about the value you place on the business, the level of dividends you expect to pay and when you’ll pay them. Ultimately, you should be able to come to an agreement which both you and the investor(s) are happy with.

How can Esme help?

At Esme, we offer business loans ranging from £10,000 to £150,000\* over a 1 to 5 year repayment period. A business loan can offer you a quick injection of capital that can help your business expand in exciting directions without having to worry about major hits to your cash flow.

Think you’re ready to make the next move? Just fill out our 10 minute application form or try our business loan calculator to get an idea of how much your monthly repayments could be.

*From £25,500 for Sole Traders

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