pen and caluclator

Keeping your business in the black

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Healthy turnover and profit are no good if the business isn’t in the black. Growing sales and poor cashflow management can push a company into the red. Keeping a company in the black is challenging but crucial for the health of a business.

Start off right

Starting a company in the right way will provide a solid base for future growth. Choosing the most suitable business structure and creating a business plan are basic steps. Inviting trusted professionals to help build the enterprise will also help the finances. A complete accounting service will provide assistance with all financial matters, from working capital and cashflow forecasting, to tax and financial analysis, all of which will keep your company healthy.

Keep an eye on profits

Although you may be growing your sales, you also need to ensure you maintain a decent profit level. Reducing production costs without adversely affecting quality should be a priority. Review the cost of raw materials, the workforce and other costs associated with production so you can see where savings can be made. Winning a large order can actually cause issues if credit terms and cashflow management is not in line.

Credit control

Credit control is crucial so clients pay in full in a timely manner. Creating a system to ensure only those able to pay on time are given access to credit will reduce the likelihood of not receiving payment. Being owed money by clients can even make it impossible to pay suppliers and forcing you into bankruptcy. Make the necessary credit checks through a reputable credit referencing agency so that you can set the appropriate credit level, or insist on cash on delivery. Be clear about credit terms and what will happen in the case of late payment. Charge interest on late payments and refuse further credit if necessary. Credit control should be a daily process, from issuing an invoice, chasing outstanding invoices and keeping an eye on credit limits to checking why orders are falling.

Cash flow forecasting

Maintaining a healthy cash flow really is the best way to ensure your business remains in the black. A healthy balance between money coming in and money leaving the account is the ideal solution. You may require professional assistance to achieve this balance, as dealing with payables and receivables on a daily basis can be time consuming.

Staying in the black is the best way for any company to operate, although it is often a huge challenge. For more information about staying in the black, contact us to arrange an informal chat with one of our advisers.