1. Monitor Your Cash Flow Regularly

You cannot manage what you do not measure. Many SMEs focus on profits but neglect to track the actual cash moving in and out of the business.

• Action:

  • Prepare and review a cash flow statement every month at a minimum.

    • This statement tracks your cash inflows (from customers) and outflows (for expenses like rent, salaries, and suppliers).

    • Use this to identify trends and potential shortfalls before they become critical.

2. Speed Up Your Accounts Receivable

The faster you collect money from your customers, the healthier your cash flow will be. Delayed payments are a major cause of cash shortages for SMEs.

• Actions:

  • Digitise your payment options and expand your range of methods to ensure you get paid quicker.

  • When issuing invoices, implement clear payment terms and send them out promptly.

    • Use accounting software to automate invoice reminders for overdue payments.

  • Consider offering a small discount for early payment to incentivise customers to pay faster.

3. Manage Your Accounts Payable Strategically

While you want to collect payments quickly, you should manage your own payments to suppliers strategically.

• Actions:

  • Don't pay bills earlier than necessary unless there is an early payment discount that makes financial sense.

  • Schedule payments to align with your cash inflows to avoid a cash crunch.

  • Maintain good relationships with your suppliers, as they may be more willing to offer flexible payment terms in times of need.

4. Keep Business and Personal Finances Separate

Mixing personal and business expenses is a common bookkeeping mistake that complicates financial tracking and creates compliance risks.

• Action:

  • Open a dedicated business bank account and use it for all company transactions.

    • This provides a clear record of business income and expenses, making it easier to track cash flow, prepare financial statements, and file taxes accurately.

5. Leverage Technology and Automation

Manual bookkeeping is time-consuming and prone to errors. Modern accounting software, such as Xero, QuickBooks, and Zoho, can automate many of the tedious tasks associated with cash flow management.

• Action:

  • Adopt a cloud-based accounting solution to automate tasks like invoicing, expense tracking, and bank reconciliation.

    • This provides real-time visibility into your financial health, enabling you to make more informed decisions to manage and improve your cash flow.