Running your business

Cash flow management

Five steps to better cash flow management

  1. 01

    Manage payments

    Late payments are a tough problem for small firms to deal with. Yet some companies won’t chase bad debts because they fear it will have a negative impact on customer relationships. 

    Take practical steps to stay in control of payments;

    • Make sure your payment terms are clear, if they’re not, it could lead to delays
    • Emphasise legal requirements to meet terms
    • Think about placing incentives on swift payments – even a small discount of 0.5% on some orders might encourage prompt payment. 
  2. 02

    Check for creditworthiness

    It’s also important to check your customers are creditworthy. If you accept larger orders from individual clients, take steps to reassure yourself that they’ll be able to pay. And refuse so-called ‘back-to-back’ payments - where you get paid when the customer gets paid, which can cause your business problems later.

    It’s also a good idea to think about your supply chain as part of any creditworthiness checks you do. Our guide to supply chains could help you to map yours out and identify any areas to be aware of.

    Top tip

    It’s worth considering placing incentives on swift payments. Even a small discount of 0.5% on large orders might encourage prompt payment.

  3. 03

    Be as efficient with your money as possible

    It’s wise to manage your stock and inventory effectively. Overstocking eats up cash, but equally try not to run out of stock either. If you’ve large capital payments to make, or your day-to-day costs are high, try to finance the company without putting pressure on your cash flow.

    Could leasing work for you?

    • Ask whether you can lease equipment rather than buy it, because high capital costs are often tricky for businesses to deal with. 
    • Leasing protects your cash flow, which makes it a good investment but it may cost more in the long term.
  4. 04

    Free-up cash reserves

    As well as standard loans, there are other options that might help your business to keep some cash in reserve. 

    • Asset finance spreads the cost of capital investments
    • Invoice finance helps release cash from unpaid invoices. If you’re suffering because of late payments, invoice finance could speed the process of getting cash to your account.
    • Trade finance can be used when you need to make capital purchases, but the seller won’t offer terms.
    Once you’ve built up a cash reserve, keep a proportion of it in an emergency fund.
    Security, guarantees or indemnities may be required. Product fees may apply. Over 18s only. Subject to status, business use only. Any property or asset used as security may be repossessed or forfeited if you do not keep up repayments on any debt secured on it.
  5. 05

    Have a contingency plan

    However you finance your business, it’s important to have back-up plans in place. Small businesses rely on access to funds and the availability of cash, so an unexpected payment can quickly drain your business.

    • Don't invest everything you have in the business 
    • Consider spreading your payments
    • You may wish to consider putting an overdraft in place for emergencies – you don’t have to use it, but having one could give you a little peace of mind

Try easy-to-use accounting software

FreeAgent accounting software is free for as long as you retain your NatWest business current account. FreeAgent helps over 150,000 small businesses to manage their finances. Learn more about how it could benefit your business.

Specific account eligibility criteria apply. Optional add-ons may be chargeable.

Get your 90-day cash flow forecast

Our interactive tool lets you see 90 days ahead into your predicted cash flow future and then test different scenarios by adjusting sales, margins and overheads.

The tool was built in partnership with FreeAgent, award-winning* accounting software.

This document is a forecasting guide for illustrative purposes only and VAT amounts are purely indicative. None of the content should be construed as advice on tax or financial matters.


*Friendliest Software of the Year, Institute of Certified Bookkeepers Luca Awards 2023.


Help with rising costs

Visit our new hub for help managing the impact of rising costs. It includes cost saving tips,and resources to help your business plan ahead. 

How to run your business day to day

Learn how to manage your cash flow, take payments and employ staff.