There’s no doubt that running a business has many rewards, but it also has its challenges.

As well as doing the day job, it’s your responsibility to look after books and make sure you are up to date with your bills – and that can be a headache many people put off for another day. In any successful business, staying on top of your books is just as important as providing a top-notch customer service. Putting admin on the bottom of a never-ending to-do list could mean you are storing up problems for later. If you are bamboozled by cashflow forecasting and frustrated by dealing with late payers, you are not alone. Cashflow problems are the biggest killer of small businesses, with recent research showing that over 70% of small business owners see it as their biggest threat. Here is some straightforward and practical advice on how to keep your business out of financial trouble.

Stay on top of cashflow

A regular cashflow forecast will show you how much money the business is paying out and how much money it has coming in each month. This will give you a much clearer picture of your financial health compared with your monthly bank balance. Many businesses that go under are not loss making; they simply run out of cash and cannot pay the money they owe. Make sure your forecast includes not just your suppliers, rent and any employee salaries, but also big lump payments like your annual corporation tax, quarterly VAT and large, ad hoc payments. These are particularly important because, if you have not set aside money, you may well not be able to pay them. Managing your cashflow can be a challenge but there is plenty of help online. Many cloud-based applications and online bookkeeping tools are free to use. Pandle, for example, gives real time cash reporting and forecasting so that you can easily spot current or future cashflow problems and react.

Get organised and aim to get paid on time

Keeping track of who owes you what and when they were supposed to pay can be time-consuming and frustrating – being organised is key. Getting a diary and keeping on top of who owes you what and when will help you take control of your finances. With trade customers, you may also want to consider how long you allow them to pay. According to the Prompt Payment Directory, many business owners simply stop paying themselves when customers drag their feet on bills. You may want to reduce your payment terms, say from 28 days to 14, and you could offer discounts for early and up-front payments. Even with the right attitude, it can become a huge task to keep track of invoices, who has paid and who hasn’t, and who needs a reminder. Online tools can help you keep track of payments, and some even automate the process of chasing and reminding clients for you. In our experience, the majority of invoices aren’t paid on time due to disorganisation and forgetfulness rather than a desire to deprive you of your hard-earned cash.

Beware of your customers

If you are working flat out yet making meagre money, it is a sure sign either your own costs are too high or your prices too low – or both. Becoming over-reliant on too few customers for a large chunk of business is also dangerous – what happens if one suddenly becomes insolvent? Be clear about your customer base. Often, 80% of your time will be spent on 20% of your customers. Is the 20% generating a profit? Analyse your timesheets and how much they are spending. If it isn’t enough, aim to get rid of them. Avoiding financial difficulty by taking care of your company books does not have to be mind-boggling. Don’t wait for trouble. With the wide range of software available online – and often free – it has never been easier to master this vital area.


Lee Murphy, managing director, Pandle

Lee Murphy is the founder of Pandle, the cloud bookkeeping software specifically for small businesses and the self-employed.