Why businesses should make strong cashflow their goal for 2016
28 January 2016
Businesses need to prioritise cash flow in 2016 to ensure stability and help drive growth, according to London based accountants Griffin Stone Moscrop & Co (GSM).
Cash flow refers to the net amount of cash and cash-equivalents moving into and out of a business and having healthy cash flow is an important part of a business’s survivability.
Many small-to-medium businesses will face new cash flow issues in the New Year with the introduction of the National Living Wage (NLW), which will see the minimum wage rise to £7.20 per hour for employees over the age of 25 from April.
Some companies will also face the additional payroll costs associated with the on-going auto-enrolment scheme for workplace pensions, but businesses will benefit from new rules on benefits-in-kind.
Under the new rules employers will be exempt from paying income tax and national insurance contributions on benefits worth less than £50 that are provided to employees.
However, many businesses are likely to continue to struggle with late payments from customers, despite new rules from the Government that will enforce shorter and stricter payment periods.
Jenny Tolmie, Partner at GSM, said: “All businesses should be aware of their current cash flow situation and should also have some idea of their future cash flow.
“Businesses are likely to see costs go up next year, especially with the introduction of the NLW, which could affect the health of a business’s cash flow.
Jenny added that profitable and seemingly successful businesses had failed because cash flow had suffered and they weren’t able to pay outstanding bills on time.
“Speaking with an accountant could be extremely beneficial to businesses concerned about cash flow,” said Jenny.
“Most firms will be able to help you forecast future cash flow and manage current costs and payments to ensure your business’s cash reserve remains healthy.”
If you would like to know more about our range of cash flow and budgeting services, please contact Jenny Tolmie on 020 7935 3793 or via email jtolmie@gsmaccountants.co.uk
The author is a partner in Griffin Stone Moscrop & Co, a member of UK200Group which has offices throughout the UK and Associates overseas.