cashflowinvoicingpayment termsstock levels

5 ways to improve your bank balance… without taking on more debt

Too often the instant gut reaction for a business struggling with a lack of cash is take out a business loan, get a company credit card, extend the business overdraft or sign up for an invoice finance facility.

A lack of cash in a business is usually a symptom of problems within the business. To identify the right solution, we need to treat the real cause of the lack of cash.

Before you consider taking more debt in your business, I encourage you to consider the 5 options I have set out below.

Small improvements in these areas can result in a dramatic improvement in your business cash flow. Often results can be seen very quickly. The important thing though, is to keep focused on these areas, be consistent and the improvements will become lasting changes.

More cash in a business is a great way to relieve stress for business owners concerned about a lack of cash – unable to pay the wages, pay suppliers on time or pay tax bills.

We have used each of these 5 ways to improve the cash position in our own business and to improve the cash flow for many of our clients.

Cash Flow

  1. Invoice earlier to improve cash flow

So, you complete the work for a client, you’re busy and make a mental note to send the client an invoice…


All too often you’ll forget, if you’re lucky you’ll remember later that day, at the end of the week, or maybe in a months-time.

A delay in invoicing after you’ve completed the work means it takes longer for you to receive payment.

Adding to your stress levels and putting more pressure on business finances.

What you can look at doing to make improvements is:

  1. Invoice as soon as the work is finished, if it’s you doing all the invoicing, why not delegate this task to a team member. If you don’t want them to send the invoice out to the customer, at least they can draft it for you to review.
  2. Change your invoicing process to reduce delays. If you currently have a manual process, why not automate this? Cloud accounting software like Xero have enabled many business to invoice (and get paid) quicker.
  3. Invoice in advance – if you have to purchase materials for a client order, or the project is expected to take several weeks or months, why not agree a payment in advance?


  1. Change your payment terms to improve cash flow

What are your payment terms at the moment? 7 days, 30 days 60 days or more?


Have you considered changing them?

Why not?

Let’s assume you have a monthly turnover of £50,000 and offer 28 days from date of invoice payment terms to customers and they are great customers and pay on time.

Your bank balance could get a one-off boost of £25,000 just by reducing payment terms to 14 days.

£25,000 extra cash in the bank, without having to do any extra work.


  1. Ask suppliers for extended payment terms to improve cash flow

What are your existing payment terms with your suppliers?

If you’ve been trading with them for some time and have been a good payer.

If you’ve got a good credit rating.

Maybe you’re happy to sign up to minimum order levels.

All great news for your supplier.

So why not ask for extended payment terms and a commitment to pay on time all the time.

If you purchase £20,000 of products from a supplier every month and they extend your payment terms from 30 days to 45 days, that’s a £10,000 improvement to your cash balances.


  1. Reduce stock levels to improve cash flow

Order stock more frequently.

Don’t just order stock of certain products or materials at the same time every week/month, pay closer attention to existing stock levels and customer orders. Can you reduce stock levels of certain materials or products by 5%, 10% or 15%, or maybe more?

Reduce wastage – get your team to return unused materials which can be re-used. Incentivise your team to reduce wastage

Check on supplier lead times. If a supplier can deliver to you, at the same price, once a week, why order 1 or 2 months of stock at a time?

Less stock siting in the warehouse, in the yard or on site can mean more cash in your bank account.

And peace of mind.


  1. Get customers to pay quicker to improve cash flow

We’ve already spoke about shortening payment terms to customers to improve your cash flow.

Other ways you can get customers to pay quicker include:

  1. Have more payment options, don’t just rely on bank transfers and cheques. Offer online payments using providers such as Stripe, PayPal and Worldpay.
  2. If you have a mobile workforce such as engineers, plumbers, electricians, who invoice clients at their premises when work has been completed, why not provide them with mobile payment devices to take card payments.
  3. Direct debit may be an option for you. There are some providers who have excellent facilities for small business, such as GoCardless.
  4. Get better at credit control. Don’t just chase customers for payment when its late, why not contact them just after the invoice has sent and a week before payment is due, just to check everything is ok and to confirm when payment will be made.
  5. Offer prompt payment discounts to good customers.


Now we know that not all these suggestions will work for every business but I’m confident that at least one of them will.

And, if you’re consistent in your focus and implementation of better processes in these areas you will see improvements in your bank balance and a reduction in your stress levels.


If you would like to find out more about how we work with businesses to help them improve their cash flow, please get in touch.