Cash is not profit
A profitable business can still run out of money. Cash flow is about timing — when money comes in versus when it goes out.
1. Shorten your payment terms
Default terms in the UK are often 30 days. Try:
- 14-day terms for new clients
- Deposits (25–50%) on large jobs
- Direct Debit via GoCardless for recurring work
2. Invoice immediately
Don't wait until month-end. Most accounting software lets you send invoices the moment work is complete.
3. Chase early and politely
- Day 1 after due date: friendly reminder email
- Day 7: phone call
- Day 14: formal demand referencing the Late Payment of Commercial Debts (Interest) Act 1998 — you can charge 8% above Bank of England base rate plus a fixed compensation fee (£40–£100)
4. Negotiate supplier terms
Ask key suppliers for 30 → 60 day terms. Most will say yes if you've paid on time historically.
5. Use a 13-week cash flow forecast
A rolling 13-week forecast highlights cash dips before they bite. Update it weekly. Free templates exist in Excel; Xero, Float and Fathom integrate directly.
6. Spread tax liabilities
- VAT: file monthly returns to get refunds faster (if you regularly reclaim)
- Corporation tax: consider Time to Pay with HMRC if cash is tight
- PAYE: use the Employment Allowance (£5,000) if eligible
7. Review your pricing
Most small businesses are 10–20% under-priced. A 10% price rise with 5% client loss is still a net cash win.
8. Consider invoice financing
Funding lines like MarketFinance or Stenn advance up to 90% of an invoice within 24 hours. Costs ~1–3% per invoice — often cheaper than the cost of being short on cash.
Need a cash flow forecast built for your business? Talk to us.