Cash Flow Is King – How to Keep the Cash Flowing in Your Business
Every business owner knows that when it comes to financials – cash flow is king. It doesn’t matter how many debtors and creditors are on your balance sheet, your day-to-day operations depend on cash.
When it comes to maintaining a healthy cash flow, good financial management is key. You’ll need to accurately forecast for the future and make sure ensure you have cash in the bank. Here are some tips to bear in mind:
Collect – many small businesses can do much to improve their incoming cash by simply following up with their creditors and collecting on receivables. Ensure you send invoices to your clients in a timely manner and send follow ups and reminders regularly. Merchant facilities will make it easy for your clients to pay you – consider setting up credit card payment with your bank, requesting a retainer before commence a job or offering a discount to clients who pay early.
Manage – budgeting is vital to small business success. Prioritise your current and future expenses to fit your cash flow forecast. Stick with your budget and schedule payments to maximise the amount of cash you have in hand. Plan for seasonality and variances in incoming funds. Smaller monthly payments are generally cash flow friendlier than large outright purchases, so operating leases and other forms of asset finance are great ways to manage your capital acquisitions. Make note of your debtors and determine which ones are more flexible with offering an extension on payment.
Respond – of course the nature of business is unpredictable, and there will be plenty of moments that you’ll need cash. Short term loans can help in these instances so maintaining a good relationship with your on-going lending institution is a good idea. Meanwhile, speaking regularly with multiple lenders lets you compare rates and find the best option for your business needs.
Finally, make sure your business isn’t affected by bad business. Doing a quick credit check on new clients will ensure that they good credit history – so you’ll know that you’ll be paid on time.