How to manage your cash flow throughout the year

4-minute read

Mon Dec 2 2019

Artisan food and drink business, Sloane’s Hot Chocolate, faces three significant challenges when it comes to cash flow. 

1.       Operating costs – ongoing rent and bills for business premises, and suppliers for ingredients

2.       Stand fees for events and exhibitions – advance payments for stand fees

3.       Buying ingredients in bulk - bulk costs during peak months of the year

So, how does this posh hot chocolate company and Barclaycard Business customer manage to not only stay afloat, but to thrive? We talked to owner Brian Watt to get his top tips for managing cash flow.

Use a credit card to pay for things in advance

Brian: Before we can get excited about revenue, we have to juggle a lot of operating costs.

Like a lot of small businesses, those costs range from rent for premises to the cost of ingredients. While the first of these is predictable and therefore easier to manage, the ingredients we need and when we need them depends on the events we attend and the time of year.

We rely heavily on events to market our products; they’re our main source of publicity. From food fairs to large-scale exhibitions, every event has stand fees and other associated costs that need to be paid for well in advance. This can be a cash flow nightmare, because we’re paying out a lump sum long before we generate any revenue from the events themselves.

Things can get particularly tricky in the run-up to our peak period – Christmas. This is when most of the events happen and therefore when final instalments of exhibition fees are due.

September to December is also the time when we need to fork out for enough raw materials to produce enough hot chocolate to meet the Christmas demand. And the months when we need to pay cash to new suppliers when we’re sourcing ingredients to launch innovative new products, like our turmeric hot chocolate. 

Paying exhibition fees using our Barclaycard business card allowed us to free up cash to cover costs for artisan ingredient suppliers and other local business partners.

Without this flexibility, we may well not have been able to meet these costs or invest in events marketing, which we rely on to expand our business.

Take advantage of the right promotional offers for you

Brian: Using a business credit card to pay for things is itself a really helpful tool when it comes to managing cash flow. But that’s only one element of it. During a particularly busy period in 2017, we applied for a promotional deal on our Barclaycard corporate card. It meant we had 0% interest on new purchases for three months.

Aside from the obvious cash flow benefits of this deal, it also meant we were able to order more raw ingredients, finish making all of our Christmas stock earlier than usual, and be better prepared to meet customer demand.

Being this flexible means we could make decisions based on the quality of the ingredients alone, not on whether our suppliers would accept cash or card payments.

If you can find the right deals or promotions for your business, you might find yourself able to free up cash to grow your business.

Forecast the upcoming year to stay in control

Brian: When it comes to cash flow, the most important thing for us is to try and plan activity that we have to pay for across the year, and to forecast when revenue will come in. By doing this, we can work out when we need to make sure we have cash reserves in the bank.

One way we stay in control is by using the online servicing tool that comes with our Barclaycard corporate card. It just means we can see exactly where our finances are, what we’re spending money on and when, and we can pull reports as often as we need to, for our accountants but also just for us to keep a track of things.

We were able to pay the balance of the things we bought during the three-month 0% interest-free period, so we didn’t incur any fees. Ultimately, that helped us to be better prepared for the Christmas rush.

This success means I’ve been able to focus on expanding Sloane’s Hot Chocolate in the UK but also with distributors abroad.