A guide to business cash flow management issues

Maintaining a healthy cash flow can be the difference between prosperity and going under. GrowthBusiness speaks to business builders about how they've tackled the hurdles of cash flow, and what they recommend as best practice.

Making acquisitions, raising funding and launching joint ventures are often the big benchmarks when it comes to growing a business. However, cash flow remains the single most important consideration for entrepreneurs and business leaders today.

To delve further into the issue, GrowthBusiness has compiled a digital guide looking at the various forms of finance available to help balance cash flow. We also meet with business owners to find out the problems they have had when it comes to managing cashflow and how it has shaped the way they run their companies.

Maintaining accurate cash flow projections

Stephen Bentley of Granby Marketing Services provides an insight into the guide’s content and tells us how he solved a cash flow problem that threatened to leave his business overly exposed.

Picking up a business as part of a turnaround transaction often means finding a lot of skeletons in the closet that have contributed to the company falling on hard times.

For Stephen Bentley and his team, the journey in taking Granby Marketing Services back to profitability has hinged on first ensuring that solid revenues were flowing through the front door and secondly focusing on maintaining a solid cash flow to support the growth of the business.

When he joined the company twelve years ago, by way of an acquisition from American firm Omnicom Corporation, it was turning over around £1 million. Last year the business posted £5.2 million and is projecting healthy growth for the remainder of this one.

Granby Marketing Services supplies handing and fulfilment services to clients such as Comparethemarket.com, for which it is responsible for delivering the Meerkat toys awarded to customers which take out a policy with the website.

As directors, Bentley and his colleagues had made commitments to the business to ensure that there was going to be enough cash in case of emergency.

Four years ago the business moved from a four week rolling cash flow to a 13 week one updated on a weekly basis in the hope that it would provide a more accurate representation of how the business was performing and ensure that it was prepared for any unexpected financial hits.

The crunch moment was when it was hit with a big corporation tax payment, a shock which sent alarm bells ringing.

The structure of the business meant that with cash coming into the business in the first week of the month and payments going out in the final week, it was thus very exposed during the middle period.

‘It gives us something which is in line with payment terms so we know what kind of revenues we will be getting in and what sort of payments are going out,’ Bentley explains of the new system.

‘Also, it aids in looking at where the drain is going to be, anything we have coming up on the horizon to be aware of like corporation tax or a VAT bill and any large purchases that are coming out.’

In comparing it to Granby’s previous monthly rolling cash flow, Bentley says that its not just the frequency that benefits, but the ability to stay on top of a list of clients that don’t pay on the same day.

Bentley describes cash flow as a discipline, not something that a business can just get away with and hope for the best.

‘The easiest thing for people to do is just assume it will take over itself – you get an invoice, you get paid. Looking back I should probably have focused more attention on the issue earlier. It hasn’t penalised us but if you are going to say would it have given us a bit better control earlier then I would have to say yes.’

See also: 21 tips for cash flow management

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for GrowthBusiness.co.uk from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

Related Topics

Cash Flow