Cash flow management: Navigating the tougher side of self-employment


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January 28, 2020

There are a lot of positives to being a self-employed plumber: you can have more flexibility around when you work, where you work, what you work on and sometimes you can make a lot more money. But along with the ‘day job’ comes a load of less appetising business management which at times can feel overwhelming.

Cash flow black holes
Although it’s the start of a new year, which often comes with new opportunities, January can be a tough month as businesses experience all of the tricky stuff – bills are due, some staff have been paid early, and customers are paying invoices late because everyone goes on holiday over Christmas. Add that to the impending VAT and corporate tax bills if you are a limited company and you can find yourself facing a cash flow crisis. 

Cash flow challenges can also come as a result of positive business growth – hiring new people or investing in new equipment or vans. But the tax bills and the continuous challenge of managing the gap between paying out for materials and customers settling their bills is nonetheless a key contributor to keeping this trade’s business owners awake at night.

Predictably unpredictable
The key is to stay one step ahead. Do your research and put the right structures in place, so you can move through cash flow challenges as smoothly as possible. HMRC might be a confusing

Plumber with bad cash flow chart

beast but that bill is as regular as clockwork. Keep your books up to date so you can predict the scale of the cash flow assault and don’t wait for the reminder letter. There are lots of options for boosting cash in the bank to cover tricky months – overdrafts and alternative loans. But lenders may refuse to lend to you with an outstanding tax bill, which means the situation can quickly spiral out of control. It can be very risky playing chicken with the tax man and the result could be more than just a slap on the wrist. It might be a threat to the existence of the business itself.
You need to track and maintain a comfortable level of working capital so your business can keep going and growing. Know when you are going to have it covered and know when you need to take advantage of the finance available in the market. You no longer have to go and negotiate with your bank manager or pile the debt onto a credit card. There’s a range of finance options that can help, whether it's a short-term business loan , a bridging loan , an overdraft alternative or another type of cash flow finance.
Do your research in advance so you can make smart decisions without the pressure of a bill deadline. You might be more comfortable with a wrench in your hand than managing your accounts, but a bit of planning goes a long way to avoiding unnecessary stress, so it's worth getting your head around.

About Funding Options: Funding Options is the free marketplace for business finance, helping businesses in the UK and the Netherlands walk tall by finding the best funding for their situation. Whether they’re looking to grow, fighting for survival, or simply need finance to pay a VAT bill – we match them with over 70 of the best lenders.

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