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The second cause of poor cashflow - Your accounts payable process

Anna Stubbs • Apr 19, 2024

The second cause of poor cashflow relates to when and how money is spent in your business, and includes your Terms of Trade with suppliers.

Do you have spending budgets in place?


It’s best practice to prepare an overall business budget every year, usually before the beginning of the new financial year. It’s also best practice to make sure that team members with the authority to order products and services are doing so within the parameters of an agreed budget, and that controls are in place to ensure that department spending budgets are not exceeded.


Now is a good time to review (and document) your Accounts Payable process, from ordering right through to making payment.


When was the last time you reviewed your suppliers’ Terms of Trade and prices?


Terms such as payment expectations, discounts for early payment, late payment implications, insurance, and warranties are all worth a closer look. What controls are in place to ensure supplier payments are made on time and discounts for prompt payment are maximised? If you’re not paying suppliers on time, you need to look at freeing up cash in other areas to ensure you’re meeting your payment terms.


Have you recently evaluated the pricing of your current suppliers and compared this with competitors’ prices? Your evaluation should include delivery charges, payment terms, and discounts.


There are many more strategies you can employ to minimise the risk of fraud and human error, maximise prompt payment discounts, and build strong relationships with your suppliers.


Talk to us about your accounts payable processes. At a Cashflow & Profit Improvement Meeting, we can show you how to improve your accounts payable processes to manage your cash outflows more effectively.

Are loans to directors and employees tax free?

By Anna Stubbs • 14 May, 2024
If you’re a director then taking out a director's loan against the cash in your limited company might seem like a sensible thing to do. But the reality is that overdrawn loans to directors can lead to unintended tax consequences if they’re not properly managed.

HMRC is cracking down on additional income sources

By Anna Stubbs • 14 May, 2024
HM Revenue & Customs (HMRC) has an obligation to ensure we all pay the correct amount of tax. But with many UK taxpayers now earning money from various ‘side hustles’, like eBay, Etsy or Airbnb etc, there’s a growing need to widen the net and review all sources of income. HMRC’s new initiative aims to weed out taxpayers who aren’t fully declaring their income sources , with detailed investigations to prosecute any wrongdoing.  So, what does HMRC see as a ‘source of additional income’, and what could the impact be on your tax bill if you fall within the scope of HMRC’s new initiative?

The seventh cause of poor cashflow - Sales levels are too low

By Anna Stubbs • 19 Apr, 2024
It might sound obvious, but it isn’t to many businesses. If current sales levels don’t support the overheads and other cash demands on the business, then your overdraft will keep increasing. This means that your business in its current state is not viable (unless you have ongoing access to new funds from investors or financiers). There are five ways to improve your sales levels. These are: 1 . Increase customer retention . Stop your customers from defecting to the competition. 2 . Generate more leads . Gain more enquiries from people who are not yet customers. 3. Increase your sales conversion rate. Get more of your prospects to buy from you. 4. Increase transaction frequency. Engage your customers to buy from you more often. 5. Increase transaction value. Help your customers to buy more products or services from you. There are literally hundreds of individual strategies that you can implement within these categories to increase sales. Sending you a list would be pretty silly of us and overwhelming for you. Some strategies don’t apply to your industry, and some just won’t work in your business for whatever reason. What we have found through experiencing a wide range of client situations over the years, is that certain things do work in each type of business. There’s a pattern that we see in clients - both good and bad! How does a business grow its sales without its owners becoming overwhelmed by a mountain of change? The best and most supportive way to grow and improve a business is to have someone looking over your shoulder from time to time, helping you build a plan and a forecast, and keeping you accountable to making the changes that will make the most important differences. Without that support, we all end up in our business and never working on it. Talk to us about how we can provide that support.
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