Cash flow problems are rarely caused by a lack of sales.
They’re caused by timing.
Money shows up on your profit and loss, but hits your bank days or weeks later. That gap is where stress, rushed decisions, and awkward supplier conversations tend to live.
A debtor is a customer who owes you money.
You’ve delivered the work or goods, raised an invoice, but haven’t been paid yet.
Also known as accounts receivable.
A creditor is someone you owe money to.
You’ve received goods or services, but haven’t paid the bill yet.
Also known as accounts payable.
• Debtor → owes you (cash coming in)
• Creditor → you owe them (cash going out)
This is where many business owners get tripped up:
• Sales increase profit and create receivables
• Costs reduce profit and create payables
• Cash only moves when money is actually paid or received
That’s why profit does not equal cash.
You might:
• Wait 30–60 days to get paid
• Pay suppliers immediately
• Have VAT and payroll due before cash comes in
Result: a profitable business, but squeezed cash.
• You invoice £30,000
• Costs are £15,000 → £15,000 profit
But:
• You collect £10,000
• You pay £12,000
Your bank balance drops.
Late-paying customers:
• Tie up your cash
• Force you to fund wages and overheads
• Limit your ability to invest or grow
• A few customers dominate outstanding balances
• Invoices sit at 60–90+ days
• You cannot explain the gap between profit and cash
• Clear payment terms upfront
• Same-day invoicing
• Consistent follow-up (not emotional chasing)
Supplier credit can help cash flow, but only if managed properly.
• Paying too early → unnecessary pressure later
• Paying too late → damaged relationships
• Paying randomly → no control
• Payments aligned with agreed terms
• Key suppliers paid consistently
• Cash reserved for VAT, payroll, and tax first
Cash goes out → work is delivered → invoice raised → cash comes in
The longer the gap, the more cash you need.
• VAT due before invoices are paid
• Payroll fixed regardless of customer delays
These need planning, not guesswork.
• Stock = cash sitting on shelves
• Work in progress = time and cost not yet billed
Both delay cash recovery.
• Invoice on the same day
• Include clear payment terms
• Make it easy to pay
• Send reminders before due dates
• Follow up immediately after
• Escalate consistently
• Take deposits upfront
• Use stage billing
• Pause work if terms are broken
• Set weekly or fortnightly payment runs
• Prioritise key suppliers
• Negotiate terms early
• Review overdue invoices
• Check upcoming payments
• Update a short cash forecast
How long it takes to get paid.
Lower is better.
How long you take to pay suppliers.
Balance is key — not too fast, not too slow.
• Who owes you (and how long)
• What you owe (and when due)
Use these to prioritise quickly.
How long your cash will last.
Use a 4–8 week rolling forecast.
• Your bank balance keeps surprising you
• You avoid looking at numbers
• Decisions feel uncertain
This is usually a visibility problem.
• Up-to-date bookkeeping
• Clear reporting
• Proactive cash flow management
At AVMK Accountants, we focus on:
• Fixed-fee support (no surprises)
• Proactive advice (not just deadlines)
• Plain-English explanations
Yes — they represent money coming in.
No — they are liabilities. The expense is already recorded.
Yes, until it is paid.
Only if the discount outweighs the benefit of keeping cash.
Debtors and creditors are not just accounting terms.
They are the engine of your cash flow.
When managed well:
• Cash feels predictable
• Decisions become easier
• Growth feels controlled
When ignored:
• Stress builds quietly
• Problems show up late
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