March 7, 2021

Cash Flow is King when running a business - How true?

Dr Peter Mowforth

Cash flow is very important for running a business. It can’t be ignored, as soon as you start tackling the task the sooner you will feel in control. In the excitement of setting up a business, it can seem a daunting and boring task but with some time, planning and software it will become your best friend. We work with cash flow in the business every day and over the years, we have developed ways of managing the tasks. This allows us to work on running the business rather than worrying about when the next invoice will be issued. We have summarised some of the basics of keeping in touch with your cash flow.


It is important to think very carefully about the bank you choose. Having a good relationship with your bank manager can pay dividends when you have lean times. They can also help with getting loans or overdrafts, or for general networking with other businesses. You can learn a lot from talking to others, especially tips and tricks. If possible it is best to have face to face meetings as you get an idea of the culture within the bank and understand what facilities that they can provide. As you grow you may need different finance options and you want to be able to have flexibility with your bank that they are interested to grow with you.

Engaging with an Accountant

Choosing to do your accounts manually or engaging with an accountant is down to what stage and budget you have.By engaging with the services of an accountant to do VAT calculations and End of the Year accounts, you know that the correct information will be submitted to HMRC and Companies House. The accountant will also keep you up to date with financial changes in tax or other financial business matters. Again like looking for a bank it is all about the relationship with your accountant. They get to know a great deal about the ins and outs of the running of the business.


There are multiple accountancy software packages to choose from (e.g Sage, Quickbooks etc) but by using accountancy software package you are automating the manual tasks that you did and also providing an audit trail of all your transactions every day. All good software will be able to provide you with cash flow reports, profit and loss reports and management reports.The other advantage of having software is that it will keep up to date with all the financial changes for example ‘Make Tax Digital’ which comes into effect very soon.Also, don’t forget to take regular backups , very important as it will save you time should anything go wrong.

Cashflow Forecasting - Income and Expenditure

Cashflow forecasting for us is at the heart of keeping our company efficient. It helps to provide details of when more work is required and when an additional cashflow injection will help. It gives an understanding of the dynamics for planning, purchasing of larger expenses and how the company is growing. Building your cash flow forecast is all about income (the money received in the business through sales and other sources), expenditure (the money spent in your business through overheads, other expenses ) the difference will allow you to calculate the net profit/loss which you can then use to calculate your bank balance forecast.

Discipline - check, check, check

The information that you get from your accountancy software is only as good as the data that is inputted. It is vital to update the information regularly and keep checking your bank balance. The cashflow will not be static so keep tweaking as required to give you the best visibility and realistic figures.Our top tip is to keep on top of the figures and the figures will inform and hopefully inspire.

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