7 Tips To Manage Cash Flow In Your Small Business
Whenever you talk about the financial management, cash always enjoys the supremacy. So, whether you have an established business or it is in its initial stages, effective management of your cash is important for the survival of your business.
In case, you have used most of your working capital, you may find it hard to pay your suppliers, buy materials, and pay salaries to your employees.
Owing to this, it is imperative you have maintained a level of working capital, allowing you to sail around through those tough times of cash crunch and continue to operate your business.
So, here are top 7 tips to manage the cash flow in your small business.
Set Cash Flow Targets
One of the best and effective ways of cash flow management is to maintain a cash flow forecast. Make sure you update them on a weekly basis, this will give you a better outlook for the next 5 to 10 months.
Setting targets for the credit controllers is certainly an effective way of confirming that it is given apt attention. And it also offers a level of satisfaction and ownership to hit and beat these.
Key Reasons Behind Having Cash Flow Forecast
- Finding out any issue related to customer payments.
- Making out any potential deficit in cash balances in advance.
- Ensuring that the business can pay both the suppliers and employees.
- External stakeholders like banks may need a regular forecast.
Agree On Clear Payment Terms
Having clear payment terms, from the beginning, has its own significance. When you are unaware of your payment terms, how you are supposed to know when you will be paid.
When you are not aware of your overdue payment, you will certainly face my difficulties while managing your cash flow.
The sooner you are sending the invoice; the sooner you will get paid. Make sure you are aware of your customer payment dates, also you don’t overlook the irregularities and delays.
When you know when you are due to be paid for service or product, it will certainly help you to stay on top of your cash flow.
Stay On Top Of Stock Management
Efficient stock management also bear same significance as managing cash flow. You should adjust your stock records at the same time when you adjust your bank account – be it weekly or monthly.
This way you will have an idea of the items left in the stock and the things you need to reorder. Having an effective stock control system will prove beneficial for your cash flow as you will never have to hold extra stock or have all your money engaged for it.
Stay Friendly With The Lenders
Since you are having a small business, you will be needing the assistance of your bank or lender for having credit at regular intervals, mainly during the outset of your business.
It is important you stay on good terms with them and keep them familiar with outgoings or any alterations in the projections. When you have a good relationship, based on trust, with your lender and the bank, they will treat your favourably if you need any future financial aid.
Access Credit
If your business is making significant progress, let us say you have received a big contract and you are doubtful about having enough funds to meet your overheads. Make sure you get access to a line of credit from a financier or a bank like a short-term loan or an overdraft.
In most of the cases, the banks show interest in lending to a business if you successfully show them a letter of intent or a draft service contract.
Once the client makes the payment, you can easily pay off your debt. All you need is to pay the interest to the financier or the bank for the amount of time you will be needing the cash.
Pay Attention To Your Outgoings
Make sure you have assessed the frequency of which you are paying your suppliers, tax bills, and utilities. This is where you can use your negotiation skills to strike the deals that are beneficial to both you and your business.
Make sure you have kept a check on all the little things you will be spending money on as they can add up – as the famous saying goes, watch the pennies and the pounds will take care of themselves.
Foresee The Problems Before They Take Place
Make sure you update your cash flow forecast, evaluate market conditions, keep an eye on both the customers and suppliers, on a daily basis to ascertain potential cash flow issue.
Make sure you don’t overlook the unpleasant realities and hope the issue will resolve on its own.
When you are on top of your cash flow, you will be in a better position to deal with such issues swiftly and efficiently.
You can also have a word with your business mentor, accountant, or investor to have more insight on this issue.
Author Bio
Sophia Jones tries to live her life like the sun – setting her sights high and vowing to always rise up again. Always game for an adventure, Sophia loves widening readers and her own expectations of our vast, beautiful world. As a journalist, Sophia writes to inform. As a creative writer, Sophia strives to inspire. Overall, she hopes to captivate. She currently writes for sites like alwaysreview etc.
Category: Business
