Managing your business: how to increase free cash flow for your business with Futrli

When you're running a small business, cash flow is always an issue. It's not just about the money coming in; it's also about the money going out. If your spending exceeds your sales, then there isn't any room for error or growth. This guide will help you take control of your cash flow by using Futrli, an online tool that offers real-time reporting and forecasting for all aspects of managing your business - from capital expenditures to receivables and payables.

What is free cash flow?

Free cash flow is an indicator of a healthy business and a sign of your profitability. It’s what’s left over after all of your expenditures, like office rent, bills, kit, taxes, and anything else you may need to pay for to operate.

To have free cash flow means you’re doing well, and will likely attract investors so it’s certainly worth pursuing. Not only that, you could use your excess cash to reinvest in your company – expanding, growing your team, or paying dividends to shareholders.

Having a business plan leads to success

You need a strong operational business plan to adhere to, so you know how much free cash to expect. Cash flow forecasting your predicted figures is going to help you to stay on the right path, as this tool works from your actual data.

Working from fact, you can see exactly where you may have missed opportunities in the past. Because your outgoings are going to be fairly set, it becomes easy to see what’s going to be going out of your bank account each period, so you can look at ways to pull more cash into your business.

Look to be doing things like:

• Get someone focused on your payables and receivables. If either of these is neglected, you won’t have an accurate view of your figures.
• Get a forecast to project where your business could be, and should be. As mentioned, you can set up your forecast to run off your historical figures, so you can get the most accurate forecast possible.
• Use scenario planning (more on this later) to explore the outcomes of various different eventualities. By creating a base scenario, project best, worst, and middle case outcomes for a plethora of issues or opportunities. This is the best way to make decisions with confidence and will help you think outside the box for answers. You always need a plan B in business, and this is the way to create it.

Other ways to increase your free cash flow are more focused on what you’re doing day to day…

Assess your overheads

What are your overheads? Do you have the right insurance, do you pay yourself a salary when times are tough or only take dividends from profits and never spend any cash on running costs?

How long can the business last without generating more income? What is your cash buffer for unexpected expenses such as replacing an old desk chair with worn wheels?

Look at your business plans and see if making minor adjustments to your outgoings will make a difference over time to your cash flow. If your business finances rely on one-off transactions (rather than being able to rely upon monthly recurring revenue) then money will be a near-constant worry, so this is going to be the easiest way to save.

Assess your spending and cash flow per month. While it is important to spend money where you need to, be careful not to overspend in areas that are already profitable for the business. For example, if advertising is bringing in more sales than cost, keep investing as much as possible there for a while longer before cutting back.

Assess your profitability per product or service

If your pricing is off, you’ll feel the pinch - no matter how good your business plan is. Can you increase your prices? Check out what competitors are charging for similar goods, and using benchmarking will show you industry averages to give you an idea of where you stand against the average.

Is it time to consider raising prices?

If so, you will need to identify your pricing elasticity in order to determine how much price levels can be increased before demand begins to fall off.

Have you got a safety buffer?

In creating this initial forecast, you’ll have a prediction of revenue for the next year. You can drill into this data to see exactly what each and every decision you make will mean for your business. When you can see a graph displaying your actual results and compare it to where you’d like to be, you’ll see how you can be operating smarter.

From here, you can use scenario planning. Each and every one of your scenarios can be compared, so you know that you’re making the best call with each decision. After creating your base scenario, you can then explore variations by linking together multiple scenarios and explore the ‘what if’ options. Get the answers you need, all based on hard data.

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