For small business owners, few challenges loom larger than their business bank balance. For many business owners, its not just a number on a screen, but a reflection of their performance and the difference between success and failure. 

Understanding the levers that effect your bank balance and how you can impact them is vital for improving the cash in your business.  

Here are 5 actions you can take improve your business bank balance. 

Credit Control – Get Paid Quickly 

A sale is not a sale until you have the money in your account. Cashflow is the lifeblood of any business and late payments can wreak havoc on your bank balance. You must implement a proactive invoicing and cash collection process to ensure your get paid on time for the goods or services you provide. You should set out your payment terms clearly at the onset of your relationship with a customer. Maintaining good relationships and communication also helps reduce the risk of late payments. 

You could consider offering incentives for early payment or implementing late payment fees for overdue invoices.  

Know your Numbers 

You cannot improve anything if you don’t understand where you are starting from. You need to understand what is working in your business and what needs to be improved. Your numbers will tell you that and you must review these regularly to stay in control and be able to make informed decisions. 

Your bank balance can only tell you so much. You must go beyond this and look at how much profit you are making – your Profit & Loss account will tell you this.  But you can have profits and no cash, your balance sheet can give you clue as to why this may be, so it’s important to understand what you owe and who owes you. 

If you have one, its also a good idea to review your cashflow forecast and see where your bank balance is predicted to be. 

Understand your Profit Drivers 

Whilst cash is king in a business, cash created from profits is what you really want. It is possible to have a healthy cash balance but still be in a lot of debt. Good profits mean you are selling more than you spend, which creates cash. 

As a business owner, who knows their numbers, you should understand what is driving your profitability. You can use that information to generate more profit and hence more cash. The 9 key profit drivers to manage are:- 

• Pricing for maximum profit  
• Variable costs  
• Fixed costs 
• Sales leads 
• Converting more sales 
• Getting customers to spend more  
• Getting customers to spend more often 
• Getting customers to remain as customers for longer 
• Systemise everything you can 

 Save for Taxes Regularly 

An inevitable result of your business being successful is the requirement to pay taxes to HMRC. Saving regularly for these liabilities and ring fencing the funds, reduces the pain a little when it comes to making payment, 

By assessing your tax liabilities regularly and moving funds to a designated “pot” the monies available in the main account are available for you as working capital within your business or as monies you can withdraw. 

This approach to segregating cash for various purposes can also be applied to saving for replacement equipment or building a cash reserve in case of tough times.  

Adopting this approach to your cash balances will focus your efforts to ensuring the main account is always as healthy as possible. 

Your Business is Not Your Cash Machine 

Whether you operate as a Limited company or a sole trader, don’t use your business as a personal cash machine. It may be your business and you may work incredibly hard, but it doesn’t mean you should take cash from the business in an unstructured way. 

Many businesses suffocate through the lack of cash because business owners don’t separate the business from their personal spending habits. This can be a costly mistake, especially in the case of a Limited company where illegal dividends and overdrawn directors loan accounts can lead to unexpected tax bills. 

By knowing your numbers and understanding what is available to be drawn, you can create a strategy for withdrawing cash that won’t drain the business. This can be revisited as the business grows. 

Improving your business bank balance requires a combination of understanding your numbers. strategic planning, disciplined execution, and ongoing support.  You can build a strong cash balance that will support the growth and success of your business for years to come.  

At Beansprout, we’re here to partner with you on this journey, providing the knowledge, resources, and support you need to thrive. Let’s work together to unlock the full potential of your business. 

Contact us at letschat@bean-sprout.co.uk