Here are a few tips that can help you to keep your business cash flow healthy
- Measure your numbers
Knowing where your business stands is a crucial aspect of managing cash flows. This entails always being aware of how your business is doing financially as it enables you to discover issues early, go around obstacles, and be aware of opportunities. Even if someone else is managing your books, always be informed by generating reports that are important to your company. Always review your cash flow statement and be aware of the amount of money that is coming and the spending of your business.
- Project cash flow
For every new year, prepare a cash flow projection as this is an early warning for any possible hiccups that may occur. You can do this with the use of an Excel spreadsheet or accounting software of your choice. Highlight expected monthly cash flows and outgoing cash that include the expected expenditure on purchases. With this projection, you can anticipate slow periods at the right time and think of the ways you can address such challenging times.
- Ensure you get paid
Always make sure you get paid for the work done and at the right time. Doing this means you need to have a foolproof system that allows you to send invoices and track all payments accurately. Doing this alone however is not enough. Make sure that you invoice your clients in time and give them a payment window that makes sense to both of you. Set automatic reminders and ensure that you follow up if payments are not paid on time. If your company is providing long-term service to a particular client, develop a multiphase payment method.
- Do not drain your cash
A leading mistake that has bankrupted many organizations is spending all cash in buying long-term assets that end up holding cash and affecting business operations. Instead of spending the better part of your company’s money on long-term assets, you should consider getting financing. Even if you have adequate amounts in your accounts at the moment, spending a significant part of it may expose you and you can end up short on cash. Develop a cash projection plan to determine your financial needs ahead of time and not in the middle of a crisis where bankers may be afraid to lend you money.
- Be proactive in taking on debt
Every business owner wants to avoid sudden cash-flow problems like unexpected debts and bills that get you cornered and scrambling for any cash you can lay your hands on. Instead of waiting for a disaster to strike for you to find a way of sorting it out, position yourself well by setting up access to credit so that you are ready to act whenever you have a financial problem that needs to be resolved urgently. Look for a bank or financial institution that is ready to help in hard times and have a credit card that can help you access cash whenever necessary. It is important that you choose a business card that has many benefits and rewards that can be helpful in your time of need.
