5 February 2024

How to Maintain Your Cash Flow in Q1, 2024

Do you have a lumpy pipeline? Is cash flow tight around year-end and at the beginning of Q1? Perhaps you had an increase in cash flow towards the end of the year and want to maintain this? As we all know, cash flow is vital; the financial pulse keeps your venture alive and kicking. So the trick is to try and keep it as consistent as possible. 

If you´re in retail or hospitality, or you´re a business experiencing seasonal swings in cash flow, here are some essential tips from an accountant that will help. 

The importance of cash flow forecasting in 2023/2024

Just a quick note about forecasting: if you´re not doing it, you should be! 

With the echoes of Brexit and COVID-19 still resonating, increased costs and squeezed customer wallets make cash flow forecasting not just useful but essential. It’s the key to understanding and preparing for financial twists and turns, helping businesses maintain a consistent cash flow amid these economic whirlwinds. Think of it as having a financial GPS, offering clarity and direction in uncertain times.

Ten strategies to improve (and maintain) cash flow

  1. Forecast and plan: Diligently map out your cash flow for the next six months by analysing past performance and anticipating future expenses and revenues. This foresight is crucial for overcoming potential financial challenges.
  1. Monitor stock levels: Remember, stock sitting unused is cash not in your bank. Aim to keep stock levels as low as operationally feasible, especially in Q4, to free up cash for the low periods.
  1. Adhere to budgets: Create a budget and stick to it. Avoid discretionary spending that can erode your cash reserves.
  1. Manage working capital: Secure favourable terms from suppliers and ensure you adhere to these. It’s also good practice to proactively collect any outstanding payments owed to your business.
  1. Effective reporting and credit control: Implement robust reporting and credit control systems to maintain a healthy cash flow.
  1. Incorporate macroeconomic factors in forecasts: Include external economic elements in your cash flow predictions – this will help plan for those “rainy day” scenarios. 
  1. Encourage early payments: Motivate clients to pay promptly to improve cash inflow. For example, you can offer incentives such as favourable rates if they pay now.
  1. Review pricing strategies: Regularly reassess your pricing to ensure it supports your cash flow and overall financial health. Likely, you´re not optimising your product mix.
  1. Prepare for financing needs: Anticipate future financing requirements and plan accordingly to avoid a cash flow crisis.
  1. Involve your team: Can your team help with improving cash flow? Since they are the ones with their boots on the ground, involve them in discussions. They may have some ideas that you haven’t thought of. 

Chart a smooth course for 2024

The only thing guaranteed is change, but if you implement the strategies we outlined above, it shouldn’t impact your cash flow as much as it could. Ultimately, staying proactive in cash flow management is key to steering your business towards long-term success and resilience.

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