Q. Cash flow is a constant headache in my business. Any tips?

A. Managing cash flow is one of the most fundamentally important aspects of financial management for any business. It sounds straightforward, but getting the balance wrong puts your business at risk.

Even if your business appears to be performing well, with good turnover and margins, if you don’t have the funds in place to meet your liabilities you could be heading for trouble.

Firstly, you need to generate sufficient income from sales to cover overheads otherwise your cash flow management is doomed. Secondly, it’s all very well generating the income but if this isn’t being converted promptly to cash you are exposing yourself to problems.

You must also check that payment terms agreed with customers fit with outgoing payments your business has to fulfil. Thirdly keep a handle on your costs, make and stick to a budget. Direct costs must be carefully controlled and constantly reviewed. Scrutinise your material and labour costs to ensure you’re getting the best possible prices. You could change suppliers for better prices but consider if the level of service will be the same. Negotiate the best possible payment terms with suppliers.

Business expenses should be kept to a minimum. You should regularly review your gas, electricity, telephone and insurance costs for example. Even bank charges can often be reduced.

You have to work to make sure you get the cash your company needs to meet its financial obligations on time. Negotiating and balancing pricing and payment terms with customers and suppliers is critical.