This guide explores credit and Cash management in small and medium sized enterprises and includes advice on maximising cash inflows, managing cash outflows, extending credit and cash flow forecasting. It is not intended to be complex or exhaustive, but rather to act as a basic guide for financial managers in smaller businesses. Cash flow management is vital to the health of your business. The oft-used saying, `revenue is vanity, profit is sanity; but cash is king` remains sage advice for anyone managing company finances. To put it another way, most businesses can survive several periods of making a loss, but they can only run out of cash once.

The importance of cash flow is particularly pertinent at times when access to cash is difficult and expensive. A credit crunch creates extreme forms of both of these problems. When the `real economy’ slips into recession, businesses face the additional risk of customers running into financial difficulty and becoming unable to pay invoices – which, allied to a scarcity of cash from non-operational sources such as bank loans, can push a company over the edge. (PDF 366KB)