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,
St Neots,
PE19 7LX

07825 152951


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Company Number 13495928
Registered in England and Wale

We recommend Dunstable accountancy practice
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I have never used a bookkeeper before so I was a bit apprehensive. Working with BW has been the best decision we have made recently. I knew we needed help with behind the scenes work and this has been a real relief.
Sam B, Cheshunt

Our judges acknowledged you are a small business however that is clearly something you use to your advantage. You have very close relationships with each individual you work with and you seem to you go far beyond what would normally be expected to ensure everyone gets the very best advice and service for them. You keep the process as simple as possible and support the client throughout the bookkeeping process. It sounds like in some cases you have saved businesses a huge amount of money which in times like this is obviously incredibly important. We are very pleased to recognise your hard work.
Judge from national business award 2021-22

Excellent bookkeeping service and knowledge of the work.
Phil Bass, Dunstable

Quickbooks Advanced Certified Pro Adviser