Why cash flow is so important

We all think that profit is the goal, but cash flow is just as important. Running out of money is definitely something to be feared.

bookkeeping and business development services

At the moment the businesses who usually make profits are having to live off their savings, or failing that, they are reliant on benefits which must have left them feeling downhearted,

Managing the cash in a business is more difficult than it seems, and I am sure a lot of people who have had a lousy lockdown will have learnt a lot about the importance of having a savings pot for the business...just in case.

There are lots of traps to fall into when the business is making money.  The most obvious is that your turnover may suddenly drop but there are other traps to avoid :

  1. Spending the money collected as VAT, without planning to pay the liability due to HMRC once a quarter.  (Our advice to clients is to ALWAYS have a savings account for VAT so that this quarterly shock is more manageable)
  2. Buying a large item (tractor, lorry, pickup) that ties up lots of the bank balance, not leaving enough to manage the upcoming wages and supplier bills.
  3. Paying subbies weekly when you can only invoice monthly.  Sometimes the work is carried out almost 2 months before the customer pays if they take their 30 days and covering the labour costs is a tricky one.


Having a bookkeeper manage the cash flow, maybe even prepare some cash flow forecasts to help you see which weeks/months are likely to be tricky before they happen is definitely worthwhile. This will give you a real sense of reassurance.

It may be possible to negotiate shorter payment terms with customers or even take card payments or deposits upfront to help ease cashflow. If you can change your wages from weekly to monthly this may give you more time to get your customer monies in each month.

Even the most profitable companies can have tricky months, so it is definitely worth keeping a buffer to avoid flying too close the sun.

BW Bookkeeping and Project Solutions Ltd.

6 Keats Court,
Eaton Ford,
St Neots,
PE19 7LX

07825 152951


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Company Number 13495928
VAT No. 450467105
Registered in England and Wales - Registered Office: Staple House 5, Eleanors Cross, Dunstable, Bedfordshire, England, LU6 1SU

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We have been a client of BW Bookkeeping since 2017 and rely on them for a range of services. They helped us change from a sole trader to a limited company and handle all our banking and VAT.
Mason Grab Hire Ltd, Aston Clinton

Excellent bookkeeping service and knowledge of the work. We recommend this firm if you are looking for a bookkeeper,
Phil Bass, Dunstable

Outstanding! BWBPS sorted out my books then provided me with the support and training I needed to get everything up to date and back on track. Friendly, professional service which I would highly recommend.
Cake Company St Neots

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