If you’re managing your business’s financial situation by keeping one eye on your bank balance and the other on your outstanding bills, you’re missing out on a huge number of insights into the liquidity of your venture.

You may be reporting year-end profits, but when your everyday cash situation is looking worrying – due to running costs, overheads and tax liabilities – it’s time to delve into the numbers and get a better handle on your cash flow.

So, what are the reasons for your business being profit rich, but cash poor?

We’ve highlighted the seven top reasons for negative cash flow, and how you can overcome these challenges to boost your cash pipeline.

Number 7 with wooden photo background isolated on white background

  • A lack of understanding of your numbers


You’re a business owner, not an accountant. So no-one expects you to be a technical accounting wizard (that’s our job, after all). But having a decent understanding of how your numbers work and fit together really gives you an edge when it comes to making business decisions.

Something as simple as understanding the difference between cash flow (the money that you can predict will flow into the business in the future) and profits (the money that’s left in the business once you’ve deducted your running costs and tax) can have a big impact.

Learning more about how your accounts work, and getting a solid grasp of your key numbers, puts you in a powerful position.

  • Insufficient business controls in place 

Understanding your key numbers is one thing. Having proper control over those numbers is another.

Your business model has probably evolved organically over time, along with the related software systems that run your internal processes. But are your processes effective? Are those systems all talking to each other effectively? For example, you need cohesive integration between your sales system and your accounting software to get the overview and control you need over your financial data.

Cloud technology has revolutionised the level of control you can have over your financial processes, as we pointed out in our last blog on innovation in accounting. [link to April blog 1 – Innovation in accounting]

Having the new breed of financial technology (FinTech) integrated into the business gives you back control of your numbers.

  • Your financial knowledge is based on historic data

Traditionally, your financial overview of your business information came from regular monthly management accounts, provided by your accountant.

But there’s one significant drawback to this approach: the information in your management reporting was based on historic data. So, in a nutshell, you were looking at the past history of your business, rather than the current situation – or the future prospects for the company.

Using a modern cloud accounting solution, like Xero online accounting, combined with the Receipt Bank data management app, provides you with a real-time view of your financial information. So you’re no longer basing your business decisions on historic numbers, but on a current, up-to-date view of your cash situation.

  • Aged debts are causing cash-flow issues

Outstanding invoices and unpaid debts can be a big problem for your cash flow – and, ultimately, for your profits too.

There will be occasions when your customers don’t settle their bill on time. And the longer that invoice goes unpaid, the greater your debtor days become – and the worse your cash outlook will be. So, how do you limit the impact of aged debts?

Again, software can come to the rescue in this situation. What technology does brilliantly is provide automation of menial admin tasks, and with a cloud solution like Chaser you can set up your systems to automatically send out chase-up emails the second that a sales invoices becomes overdue.

  • It’s not easy enough for customers to pay you

If you make it difficult for customers to pay you, you slow down the whole process of receiving their cash – creating a negative impact on cash flow and reducing your monthly profits.

Offering a variety of modern payment options to customers can resolve this issue.

Running a fast-food outlet but only take cash payments? Get yourself one of the new breed of card readers, like iZettle, that integrates with your accounting software. Customers swipe their card and pay you in a second, and all the sales data appears automatically in your accounts.

Are you managing a gym and relying on your members paying their membership fee manually each month? Offer a Direct Debit option using GoCardless’ online solution. You take payment directly from your members’ bank accounts on a specified day of the month, and your cash flow becomes stable and highly predictable.

  • You don’t have a forensic view of your reporting

To really spot your cash-flow issues, and look for the potential improvements you can make to your processes, you need detailed insights into your data.

If your view of your key numbers and KPIs isn’t comprehensive enough, you can’t make informed decisions about the business. Cloud accounting software goes some way to giving you the detail you need, but bolting on a business intelligence solution like Spotlight Reporting gives you a truly granular view of your transactional data.

Get exhaustive breakdowns of your sales, purchases, expenses and overheads. And even project your actuals forward in time to get sound forecasts of future cash flow.

  • You’re not getting the right advice from your accountant 

If your accountant is just emailing your management accounts over at month end and not giving you any proactive feedback on your numbers, it may be time to look for a new adviser.

A modern, forward-thinking accountant is one part ‘accounting expert’ to two parts ‘experienced commercial business adviser’. Cloud accounting gives you and your advisers the ability to access the same numbers and collaborate in real-time. And this makes it easier than ever for your accountant to give you guidance, insight and support throughout the yearly business cycle.

With the right accountant on board, you can streamline your processes, improve cash flow and build profitability directly into the fabric of your business model.

Talk to us about getting control of your cash

At Tyrrell and Company, we know the importance of combining cutting-edge business technology with sound, approachable business advice.

Our focus is always to help our business clients get the absolute best from their business – whether it’s improving short-term cash flow, or boosting longer-term profits. And we think it’s vital to take the best that cloud software can offer, and add the human touch that only an experienced accountant can offer.

If your business is looking profit rich, but cash poor, give us a call and we can show you just how simple it is to resolve those cash issues.

Get in touch to arrange chat and a cappuccino with one of our business advisers.

Or come along to one of our upcoming events and get the lowdown on cloud accounting, software add-ons and the future of digital business.