Improving cashflow for your clients – 5 tips for advisors

Accountants remain the most trusted advisers for many aspirational small and medium-sized businesses (SMBs), according to research by the International Federation of Accountants. And one key area where your analysis, expertise and advice as an accountant are of paramount importance to SMBs is around improving cashflow.

As an accountant, you add value for your SMB clients in a multitude of ways. But with cashflow being the lifeblood of your client’s business, it’s vital that you’re as proactive as possible in helping them get to grips with their cash position – and assisting them to improve that position.

Helping SME clients understand the impact of cashflow is a great way to start a meaningful conversation around their cashflow. But where you can truly add value is in helping them increase their cash inflows and reduce their cash outflows, while advising on what can be achieved with this improved cash position.

To help you get client discussions flowing, we’ve highlighted five actionable tips for helping your SMB clients to improve their cashflow figures.

1. Reduce operating costs and overheads

Helping your client’s business to cut down on expenditure may seem an obvious way to reduce cash outflows, but it’s an area where many businesses are less than proactive.

Reviewing cost management and looking for areas that costs can easily be cut makes a real difference to their operating cashflow, as can helping the management team to understand a figure for their average cost of overhead – and working to this as a cost target.

Ways to proactively make cost savings will include:

  • Benchmarking against an industry standard overhead cost – use a relevant industry benchmark to give you a cost figure to work from, and a starting point for identifying cost savings. For example, in service businesses 18-20% of revenue is a typical cost of overhead to use as your benchmark figure.
  • Keeping an eye out for hidden cost increases – look at areas such as software subscriptions and industry memberships, or costs growing disproportionately to revenue, and ensure you’re keep costs as low as possible.
  • Canceling company credit cards and introducing an expense process – this increases awareness on spend (which generally reduces it) and gives you greater visibility of where cash is being spent by employees. An expenses system such as Pleo will replace costly credit cards with payment cards that have a predetermined limit, while also providing full expense reporting for the client.

2. Experiment with different price points

Increasing the client’s prices brings an overall boost to income, and this is one way to increase the size of the company’s cash inflows. But encouraging clients to be brave and to try a variety of price changes – both increases and decreases – can give great results.

  • Increasing prices will push up cash inflows but it’s best to keep any increases relatively small, or to make incremental changes over an agreed period, so customers aren’t phased by the jump in price.
  • Cutting prices may sound counter-intuitive when higher income is the desired result, but a more economical price can bring in increased sales under the right circumstances – and that means an increase in overall cash.

Caution must be exercised when changing any price point, so you’ll need to look at percentage increases/decreases that bring about the desired increase in income or sales, without alienating any existing customers or reducing the company’s overall sales numbers.

What’s important is that any prices changes maintain the perceived value of your client’s products and services – and have a positive impact on the cash coming into the business.

3. Invoice immediately using online invoicing

Helping clients to get paid on time can be a gamechanger. The faster, and the more frequently, your client’s customers pay, the better their current cashflow position will become.

So work with their finance team to move them over to online invoicing, and reduce the time between sales being made and invoices being sent. Also look at how automated credit control solutions can improve the chasing of any late payments – this is an area that will significantly reduce any cashflow issues, as Stuart Budd, Commercial Director at FD Works, points out:

“Utilise automated tools to remind customers that money is owed using automatic chasing emails. Have some form of cashflow forecasting in place and have a buffer to cover for those rainy days. This could be as simple as moving money out of the current account into a separate savings account!”

4. Be proactive about managing inventory

It’s important to balance inventory management against cash outflows, especially if you’re working with product-based or wholesaler businesses. The more items that the business adds to their existing inventory, the bigger the cash outflows from the cost of manufacturing or buying in these goods – and that’s bad for the client’s overall cashflow.

To manage clients inventory more efficiently:

  • Get rid of low-selling products – if certain products in the client’s range are not selling, or are sitting on the shelves, reduce production or buying of these items – or sell them off completely to free up cash and turn an outflow into an inflow.
  • Integrate bespoke inventory apps – and integrate solutions such as Unleashed or Trade Gecko with clients’ accounting software to make inventory reporting easier.
  • Enhance clients’ current inventory processes – and help them plan more effectively and manage their stock levels in the most beneficial way for maintaining cash levels.

5. Be smart about cashflow management and forecasts

The better your view of clients’ cashflow numbers, the more you’ll be able to spot the potential cash issues. A sound grasp of their cashflow data allows you to help them overcome any cashflow-related pitfalls along the road, and warn them ahead of time so they can rectify any issues before they grow into a serious – or even business-threatening – problem.

Monitoring a client’s cashflow statement using a cloud-based cashflow solution like Fluidly gives you the best possible view of their cash position – allowing you to get smart and highly proactive with your cashflow improvement advice. You also have the inherent value of cashflow forecasting and a future view of client’s cash position.  

Cheryl Price, founder of CH Accountancy, believes it pays to take a realistic approach when it comes to forecasting cash income for your business clients.

“Be realistic when forecasting cash flow. Most people wait until the due date to pay, and some will wait to within a few days of the due date. Don’t rely on everyone paying early or on time, and work this into your forecasts.”

You also have the clear benefit of being able to access cashflow projections, and the ability to scenario-plan various improvement ideas through cashflow projections and driver-based cashflow models – giving clients an insight into the relative cash impacts of any changes.

Using insight to improve clients’ cashflow

With the best in smart cashflow intelligence tools, and a proactive approach to cost reduction and cash improvement, you can work with clients to get their cashflow back on track.

See how Fluidly gives you the cashflow platform for giving truly insightful cash advice