Cash Flow Clinic

  Every seasonal business knows the pattern: the busy quarter floods the account, the quiet quarter drains it, and the owner spends the quiet months wondering if this is the year the dip becomes a crisis. The difference between businesses that ride seasonality and businesses that are ridden by it is planning. Here is a simple quarterly dip planner. Map the pattern from history, not hope Pull twelve months of bank statements and mark the inflows and outflows by month. Most seasonal businesses are surprised twice: once by how predictable the pattern is, and once by how deep the dip really is once you include the fixed costs that do not dip (rent, salaries, loan repayments, insurance). Your dip is not "quiet months feel tight"; it is a number. Find the number. Build the dip reserve in the good quarter The rule is simple: the busy quarter funds the quiet quarter. Work out the total cash needed to cover the dip months, divide it by the good months, and that is your monthly transfe...

The debtor days problem: cutting 60 days down to 30   What debtor days really measure Debtor days tell you how long, on average, your customers take to pay you. The formula is simple: divide trade receivables by annual credit sales and multiply by 365. A business sitting at 60 debtor days is effectively giving every customer a two-month interest-free loan, funded from its own cash reserves. Bring that down to 30 days and you release a full month of sales back into the bank account. For a business turning over £1.2 million, that single improvement frees roughly £100,000 of working capital. No new borrowing, no new sales required. Measure it before you try to fix it Start with the headline number, then break it down. Segment debtor days by customer, by invoice size and by salesperson or account manager. The aged debtors report is your best friend here: a headline of 45 days can hide one large customer sitting at 90 while everyone else pays in 30. Track the number weekly, not month...

  Most small businesses chase overdue invoices the same way: a vague nudge, a long silence, then a frustrated phone call months later when the money really matters. By then the trail has gone cold, the contact has moved on, and the debt is twice as hard to collect. There is a better way, and it fits in three letters. The most effective credit control is not aggressive. It is systematic, escalating, and written. Here is the three-letter sequence that consistently gets UK invoices paid. Letter 1: The polite reminder, sent on day one Your first chase letter should go out the day after the invoice becomes overdue, not two weeks later. The tone is friendly and assumes the best: perhaps the invoice went astray, perhaps it is sitting in someone's approval queue. Include the invoice number, date, amount, and a copy of the invoice itself, because the single most common reason for non-payment is that the invoice never reached the person who pays. Subject lines matter here. "Copy inv...

Setting Credit Limits for New Customers Without Killing Sales Credit limits sit at the fault line between sales and finance. Set them too tight and you strangle growth; set them too loose and you fund your customers' cashflow problems with your own money. Here is a practical framework for setting credit limits on new customers that protects the business without killing sales.   Start with information, not instinct The most common way small businesses set credit limits is gut feel: the customer seems decent, the order is not huge, so give them 30 days and a reasonable limit. That works until it does not, and when it fails it fails badly, usually with one large customer who goes quiet. Before you set any limit, run a credit check: it is cheap and reveals payment history, county court judgments, and financial position. For larger exposures, look at the latest filed accounts and follow up trade references; most businesses skip this step, which is exactly why references carry sign...

  By John Thomas, Senior Accountant Every accountant has watched a profitable business run out of cash. Profit is an opinion, but cash is a fact, and the gap between the two catches out more small companies than any other single issue. The 13-week rolling cash forecast is the tool that closes that gap. Here is how to build one that actually works. Why 13 weeks Thirteen weeks is roughly a quarter: far enough ahead to see trouble coming, short enough that the numbers stay real. Annual cash forecasts are mostly fiction by month four. Thirteen weeks lines up with VAT quarters, typical supplier payment runs, and payroll cycles, so the forecast maps onto the rhythms your business already has. What goes in The forecast has three sections, and the golden rule is that it is about cash, not profit. Record every line on the date the money moves, not the date of the invoice. Opening cash is your actual bank balance on day one, across all accounts. This is the only line you cannot ...

Most late payment problems are not caused by bad customers. They are caused by payment terms that were never properly set in the first place: terms buried in small print, due dates left vague, and invoices that arrive weeks after the work is done. Here is how to build terms that get you paid on time. Put your terms on the quote, not just in the small print Your payment terms should appear on every quote or proposal, in the engagement letter, and again on the invoice. If a customer only discovers your terms when the invoice lands, you have lost your leverage. State the payment period clearly, the due date for each invoice, and what happens if payment is late. This is not about being aggressive. Professional buyers expect clear terms, and many will simply pay to whatever terms you set. Make the terms easy to find and easy to read. If you send a formal contract or terms of business, ask the customer to confirm acceptance in writing before work starts. That confirmation is your evidence...