Cash flow – it’s what keeps a business ticking day to day. For small businesses, it’s even more important because they don’t have big reserves to fall back on like the big companies. Cash flow isn’t just about how much money is coming in; it’s about making sure there’s enough on hand to pay bills, keep suppliers happy, and cover the basics like rent and wages. If cash isn’t flowing in regularly, even a business that’s doing well on paper can run into real problems fast.

For your small business clients, managing cash flow is about having some breathing room – that bit of extra cash on hand for unexpected costs, so they’re not caught off guard. And as a BAP(SA), you’re in a prime position to help them get this right.

Let’s break down a real example and look at practical, no-nonsense tips you can share with clients to help them keep their cash flow healthy and steady.

Case Study: Sarah’s Struggling Boutique

Meet Sarah, the owner of a small boutique in town. She’s got customers coming in, sales ticking along, but somehow, she’s always short on cash. Suppliers are knocking on her door for payments, rent is due, and she doesn’t know where to turn too. When she turned to her Business Accountant in Practice, she learned she’d been falling into some classic cash flow traps. With a few simple changes, she got her cash flow back on track and could breathe a little easier.

Here’s what worked for Sarah – and how you can help your clients do the same.

1. Get Clear on Cash Flow Basics

Start by helping clients understand the basics – the cash that comes in versus what goes out. Even profitable businesses can hit cash problems if they don’t track this carefully. Sit down with them and go over what cash flow means and why it matters. Encourage them to do regular check-ins (weekly or monthly) to keep a pulse on their cash flow.

If Sarah had looked at her cash flow each month, she might have caught issues early, rather than scrambling when things got tight.

2. Help Set Up a Simple Cash Flow Forecast

Forecasting cash flow doesn’t need to be complicated. Show clients how to make a basic forecast using a simple spreadsheet, listing out expected income and expenses over the next few months.

For Sarah, just having a basic forecast made all the difference. She could see when big bills were coming up and make sure she had the cash set aside, so there were no nasty surprises.

3. Encourage Faster Invoicing and Clear Payment Terms

Late payments can be a cash flow killer. Show clients the importance of invoicing right after a sale or service – no waiting around. Suggest tightening up payment terms too, so they get paid sooner.

Sarah used to give her customers 30 days to pay but switched to 14-day terms, with a small discount for early payments. It helped her cash flow almost immediately, and she didn’t need to chase payments as much.

4. Review Monthly Expenses Together

Expenses can creep up without anyone noticing. Suggest a monthly review of all recurring costs – subscriptions, rent, supplies – and see if there’s anything to cut back on or negotiate.

Sarah saved a little each month by switching to a new payment provider with lower fees. It didn’t seem like much at first, but it added up over the year.

5. Inventory Management

If your client runs a product-based business, encourage them to keep a close eye on their stock. Holding onto too much inventory ties up cash they could use for other expenses.

Sarah’s boutique carried a lot of stock, which hurt her cash flow. Her accountant helped her track which items sold best and keep less of what didn’t move quickly.

6. Build a Small Cash Reserve

Encourage clients to save a small percentage of income each month to build up a cash reserve. It might take time, but having a buffer helps them handle surprise expenses without going into debt.

Sarah put away a little every month, and soon enough, she had a small emergency fund. It gave her peace of mind and helped her avoid taking out expensive loans in tight months.

7. Use Simple Technology for Tracking

Show your clients some simple, budget-friendly tools to help with cash flow. Basic accounting software can automate invoicing, track expenses, and give a clear snapshot of their cash position.

Though hesitant at first, Sarah found that a basic accounting app kept her on top of things – she could track cash in real time and spot any issues before they got too big.

8. Help Them Control Credit Terms

Many small businesses are generous with credit, but this can seriously strain cash flow. Help clients set smart credit terms, and suggest they ask for deposits on large orders to keep cash flowing.

9. Prioritise Payments When Cash is Tight

Sometimes, there just isn’t enough cash to go around. Teach your clients how to prioritise – wages, utilities, and key suppliers should be at the top of the list. If necessary, they can talk to suppliers and arrange payment terms to ease the pressure.

In Summary

Cash flow doesn’t need to be complicated, but it does need to be managed. By helping your clients understand it, forecast it, and make small adjustments, they can avoid cash flow problems before they start. And when you help them get the basics right, you’re not just keeping the business going – you’re giving them a better chance to grow and stay resilient.

With a few simple tweaks, just like Sarah’s boutique, they can keep the cash flowing and the stress levels low.

Get Access to the Practical Cash Flow Management Strategies October 2024 CPD here.

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