If your business runs out of cash, it won’t survive, so let’s look at how to keep your business healthy. Here are five simple rules to help you understand and manage cash flow, along with easy tips for making your business run more smoothly.

If you need help navigating these challenges, our Baker Tilly Staples Rodway business advisors are happy to support you with expert advice and tailored solutions.

Five simple principles of cash flow

• Without available cash, your business will not survive.
• You need to understand your key cash flow drivers. Simply – know what affects your available funds.
• Managing your business finances is all about your business processes.
• Treating the symptoms of poor cash flow without fixing the causes is time-consuming and frustrating.
• You need to be prepared to make process changes.

These rules are important for staying in business and planning for the future. Here’s what each one means in practice.

1. Cash is essential

Cash is what lets you pay your bills, staff, rent and suppliers. You can’t run your business on sales alone if the money isn’t coming in. Some businesses make a profit but still go broke because they don’t have enough cash in the bank. For example, you might sell a lot, but if customers take months to pay, you can’t pay your own bills on time.

2. Know what affects your cash flow

Every business has key drivers that affect cash flow the most. For some, it’s how quickly customers pay their bills. For others, it’s how much stock they keep or when they pay suppliers. Work out when you receive money and when you have to pay. Knowing this helps you plan and avoid running out of cash.

3. Your processes matter

Managing cash flow is about how you run your business every day. This includes how you send invoices, collect payments, buy stock and pay suppliers. For example, sending invoices quickly and following up on late payments helps you get cash faster. Try not to keep too much stock, because that ties up money you could use elsewhere. Having consistency and a process, even as a sole trader, will work magic in any business.

4. Fix the real problems, not just the symptoms

Borrowing money in an emergency can help short-term, but it won’t fix bigger issues like slow-paying customers or high costs. Look for the real reasons why cash is tight: Is stock not selling? Are some customers always late? Are your costs too high? Fix these problems so cash keeps flowing.

5. Be ready to change

Once you find out what’s wrong, be willing to change how your business works. This might mean changing how you pay suppliers, tightening payment rules for customers or using new tools to help with billing. Change isn’t always easy, but it’s necessary to keep your business healthy.

Easy ways to improve cash flow

• Send invoices as soon as possible and follow up on late payments.
• Ask suppliers for longer to pay if you need it but keep a good relationship with them.
• Don’t buy too much stock – just keep what you need.
• Check your available funds often and update your plan if important factors change.
• Cut costs where you can – small savings add up.
• Keep a cash reserve, if possible, for emergencies.
• Look at options like a bank line of credit if you need extra cash for short periods.
• Plan going to the bank early, not when it becomes urgent

Common mistakes

• Relying too much on one customer – if they pay late, you could be in trouble.
• Not keeping good records, which makes it hard to know your cash situation.
• Forgetting that sales are slower at certain times of year and failing to plan for that.
• Not putting aside enough money for taxes.
• Thinking sales are the same as cash – remember, you only have cash when the money is in your account.
• Trying to do it all on your own. Managing your business’ finances can feel overwhelming, but you don't have to do it alone. Baker Tilly Staples Rodway offers expert support in cash flow analysis, forecasting and process improvement. With our guidance, you can better understand your cash position, make effective changes and prepare your business for growth. Whether you need regular advice or help during tough times, our team is ready to support you every step of the way.

Conclusion: Make cash flow a priority

Managing cash flow isn’t something you do once – it’s ongoing. By following these five basic principles, regularly checking your cash and being willing to make changes, you give your business the best chance to succeed and grow. Never forget: Cash is what keeps your business alive. As the cliché goes, "Cash is King!".