Many business owners focus on sales. Few focus on cash flow.
A business can be profitable on paper and still run into financial difficulties. Strong sales do not always mean there is enough cash in the bank to meet the next payment.
Why profitable businesses can face cash flow pressure
Over the years, I have seen businesses experience cash flow pressure despite having strong sales because:
- Customers paid late.
- VAT liabilities were not planned for.
- Corporation Tax was treated as an afterthought.
- Stock or project costs grew faster than revenue.
- Directors withdrew cash without forecasting the impact.
Start with a simple three-month cash flow forecast
One of the simplest habits a business owner can develop is reviewing their expected cash position for the next three months. You do not need a complicated model. Start with:
- Your current bank balance.
- Expected customer receipts.
- Payroll commitments.
- VAT and tax payments.
- Supplier payments.
- Loan repayments.
A simple forecast can highlight problems early and provide time to act. Looking ahead helps you understand what cash is expected to arrive and which commitments need to be paid.
Profit is important. Cash keeps the business operating.
Talk to KINAIE
If you are a UK business owner and would like to discuss your accounting, tax, finance systems or business growth plans, contact KINAIE Chartered Certified Accountants.
