Looking for a Public Relations Agency? Use our Free matching service to find the right agency for you.

User login

How to tell when you are heading for a cash crash… and what to do about it

As a busy small PR agency owner or freelancer, if you’ve got money in the bank and clients demanding your time it is easy to think the bookkeeping can be done later and cashflow planning is an unnecessary luxury.

However, even profitable agencies have cashflow problems, especially when owners inadvertently spend the money in the bank thinking it is “theirs”, only to find down the line it was really the taxman’s and they are facing a nasty unexpected tax bill and no money to pay for this.

Good cash-flow management is at the heart of agency success, whatever their size, and taking care of your books does not have to be mind-boggling nor time-consuming. Don’t wait for trouble. Here are three essentials to avoid an unexpected cash crash.

1 - The importance of a cash flow forecast

A monthly cashflow forecast in the number one way of not heading for the rocks.  It shows your income and expenditure for every month for at least the coming year.

Make sure your forecast includes not just your suppliers, rent and any employee salaries, but also big lumpy payments like your annual corporation tax, quarterly VAT and any large regular and ad hoc payments.  These are particularly important because, if you have not set aside money, you may well not be able to pay them.

If you use cloud accounting software, then there should be a cash-flow tool. Pandle, for example, gives real-time cash reporting and forecasting so that you can easily spot current or future problems and react.

A regular cashflow forecast is particularly important because most businesses that go under are not loss-making… instead, they simply run out of cash and cannot pay what they owe. 

2 - Beware toxic clients!

Clients can cause the sudden demise of your agency… and only occasionally is it through having too few of them!

Slow payers create major cashflow problems.  For instance, if a regular business client takes three months to pay an invoice, you will have paid out three months’ of salaries, expenses, maybe VAT and everything else before you get the first payment. 

If you are slow to get out your invoices, the problem is magnified further. Actively manage this to prevent problems building up.  Sack toxic clients who pay late and are over-demanding… your long-term gain outweighs any short term pain.

3 - Actively improve your cash-flow

Many businesses abuse their suppliers by deliberately paying them late.  Don’t be one!

Instead, get money earlier and ethically.  For instance, where possible agree 14 days not 28-day payment terms as standard, invoice for expenses before they are incurred and consider giving small discounts (say 5%) to encourage clients to pay quarterly advance (unless you can achieve this without a discount). 

If you master your bookkeeping and you master your financial destiny.  It is not rocket science and with the wide range of software available online, often free, it has never been easier to master this vital area… allowing more time for chargeable work and growing your business profitably. 


Lee Murphy is the founder of Pandle the cloud bookkeeping software specifically for small businesses and freelancers