Cash keeps business in business. However healthy the order book and profit margin, if a business runs out of cash it won’t be able to pay its suppliers, its wages, or its overheads and it will fail.

Cashflow is critical to business survival but all too often the day-to-day challenge of running a business, particularly a smaller business, can mean losing sight of some of the skills for successful cashflow management.

Cashflow keeps business in business and if you don’t pay your suppliers on time you risk damaging their business or – worse – causing, or contributing to, their failure. You want your invoices paid on time, and you should do the same. It’s not just good business practice and ethical behaviour; it’s also a demonstration of corporate social responsibility.

If payment fails to arrive for goods or services you have provided, your cashflow can be under real pressure. Cashflow keeps business in business and - if you think you are being paid on one date and your customer has a different date in mind - you could be in trouble! Making assumptions is dangerous and formally agreeing payment terms in advance is vital.

If you don’t raise an invoice, you won’t get paid. Invoicing should not be seen as a back-office administrative nuisance. Rather, it is a vital first-step in achieving healthy cashflow.

Inevitably, businesses fail and - when one of your customers goes bust - it hurts. There is little you can do except wait to hear the outcome. The general outcome is that the debtor’s assets are divided amongst its creditors and the insolvent debtor is released from the burden of its debts. Once most formal insolvency processes are underway, you cannot start or continue any action to recover your debt.

Most businesses extend credit to their customers and extending credit requires finance. Unless a business has the cashflow to support the difference in timing between the cash it collects and the cash it has to pay out, it can be in trouble. Managing cashflow effectively means staying on top of finance and ensuring funds are available when they are needed

Sometimes, you just can’t get paid. You’ve done all the right things and the money has still not arrived. The longer the debt remains unpaid, the more likely it is to turn into a bad debt and bad debts damage your business. Legal action is always an option but there are others you should also consider.

The fact that a business is here today and is creditworthy does not mean that it will be tomorrow, next week or next year – or in fact that it will still be in business. If a customer becomes insolvent and cannot pay money that is due to your business it can be catastrophic, especially if the amount involved is large.

Unless you know exactly who you’re trading with, you won’t be able to check if they are good for the amount of credit you need to grant, you won’t be able to invoice them correctly, and you won’t be able to commence legal action effectively if it becomes necessary.