A business’s cash flow is what keeps it running, which is why managing it properly is critical to its performance. Managing the cash flow of your business ensures, among other things, that you are able to operate above your break-even point (and not on losses), and that it’s easier for you to optimise the way you spend your resources.
To help you manage the cash flow of your business, we’ve listed a few simple tips that you can follow.1. Keep track of everything
To be able to manage your cash flow better, the most important thing that you need to do is to keep track of all outgoing and incoming finances in your business, down to the last detail, as well as all activities associated with them. Use tracking sheets and assign the task to someone to make this easier. Also, make sure that whoever this task is assigned to is notified of every decision in the business involving money.
2.Minimise outgoing cash
Minimising the amount of money that your business spends is one way to improve your cash flow. Try to cut back on fixed costs such as utilities (lighting, heating/air conditioning, water etc.) but not too much that it will affect your operations or the quality of your work, products and services.
3.Extend deadlines for payables
Extending deadlines for all your accounts payable reduces pressure and also helps minimise your outgoing cash. Talk to your suppliers and B2B service providers and try to negotiate with them to prolong the window for your payables. If a liability is too large that you won’t be able to pay for it in a month, try to ask for a two-month window.
4.Shorten collection time of receivables
Make sure that your receivables are collected as soon as possible. Doing so allows you to stay on track with your cash flow. Urge your customers to pay on time using various strategies (e.g. as early bird promos, discounts on their next purchase) that promote early payments.
5.Always have cash reserves ready
Uncertainties are normal for any business, no matter the size or industry they are in. It’s not always smooth sailing, and down the road you will incur unforeseen expenses, so it’s important to always have cash reserves ready as this will lessen, if not neutralise, the impact of unforeseen events on the cash flow of your business.
6.Get help from the experts
Getting the help of financial planners and business advisers can make managing your cash flow significantly easier for you. Many of these professionals have the experience that will be of help to you, allowing you to make proper and informed decisions.