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Improve your cash flow

Cash flow shows your company's ability to pay its bills and other expenses. You could say that while profit or loss shows the difference between income and expenses, cash flow shows the difference between money coming in and money going out.

The ability to manage your payments is vital as a business owner and is often referred to as good or poor cash flow. Here are some tips on what you can do to improve the cash flow of your business. etag.

Review your costs 

Start by reviewing your costs. It is often easier to cut costs than to sell for more to make an impact on your bottom line. 

Invoice as soon as possible 

Invoice goods and services as soon as possible. Change the payment terms from, say, 30 days to 10 or 14 days when signing new contracts. Also consider sending payment reminders as soon as an invoice is due. 

If you have a large delivery, with the final delivery far into the future, you can ask the customer to pay part of the amount in advance. 

Make a cash flow budget 

With our calculator, you can make a simple cash flow budget that can be exported to Excel. 
Make a cash flow budget

Increase your overdraft facility 

One way to improve cash flow is to increase your company's overdraft facility. But remember that credit is not free, and you will have to pay interest. In addition, it is not economical to have an overdraft facility that is always utilised. In such case, it would be better to have that debt as a regular loan at a lower interest rate. 

Lease equipment 

Investigate whether it might be worthwhile to rent or lease equipment rather than owning it. In most cases, leasing is more expensive than buying, but it may be an option in the start-up phase and for equipment that you do not fully use. Be aware of any lock-in periods. 

Extend your supplier credit 

Always try to negotiate better terms with your suppliers. If the supplier is keen to sell and has good cash flow, you may be able to extend the credit period from 30 to 45, 60 or 90 days. However, you should expect the seller to compensate by charging a slightly higher price. 

It may also be worth trying to reach an agreement with suppliers that they will only be paid once you have received payment from your customer. 

Keep track of your preliminary tax 

If you receive less income than you previously estimated, you can file a preliminary income tax return with amended information so that you do not have to pay too much preliminary tax. Remember that if you pay too little tax during the year, you will have to cover this shortfall later. 

Sell assets 

Selling assets is not a long-term solution, but it can improve your cash flow in the short term. 

Turn to the Swedish Enforcement Authority 

If you do not get paid, you can seek assistance from the Swedish Enforcement Authority – both to have your debt established and to get help in getting paid. 

Getting paid at the Swedish Enforcement Authority 

For information on how you can avoid financial problems as a business owner, see the Swedish Enforcement Authority's Support for entrepreneurs. 

Support for entrepreneurs