There are only a handful of things crucial for a business’s success and financial independence- and one of them is proper cash flow management.
Cash flow management is a combination of procedures and practices that allows you to monitor and enhance your business’s financial health. However, the primary aim of cash flow management is to put your business in the ‘green zone,’ also referred to as positive cash flow. It is the phase where your business is earning more money than it is spending. With the help of positive cash flow, your business will be able to reduce debt, sustain business operations, and take advantage of expansion opportunities. On the flip side, poor cash flow management will lead you to bankruptcy.
So, if you’re a business owner looking to improve your business’s cash flow and hopefully bring it into the ‘green zone,’ you’ve come to the right spot. Listed below are a few tips that will help you stay on the right side.
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Opt for cash flow loans.
If you want to acquire more cash for your company to make ends meet, consider applying for a cash flow loan. These loans or lines of credit are short-term and are typically given by online lenders. What’s more, you can utilize these loans to pay for expenses that your business might incur when you incorporate a new hiring strategy or purchase business equipment.
However, before doing so, consider checking in with a credit analyst to ensure that you’re eligible for such a loan type. If you’re wondering what a credit analyst do, these professionals analyze your business’s financial information, including credit history, to ensure that you’re eligible for particular loan types. This way, if you’re falling short of some requirements, you can take steps to overcome them and thus take out a loan.
Update your accounting systems.
In order to manage your cash flow properly, you must incorporate newer accounting systems into your business operations or update them if your existing one is outdated. Doing so will enable you to process financial information more frequently to identify liabilities, available funds, accounts receivable, and other financial aspects. Consider going digital and using cloud-based accounting/financial solutions to ensure accuracy.
However, don’t forget that you have to review these financial balances every other day or every week to determine business opportunities, trends, and cash flow.
Hire a financial expert.
Hiring a finance or accounting professional will allow you to manage your cash flow more effectively. These professionals possess the necessary skills and know-how to optimize processes and manage day-to-day financial/accounting tasks more efficiently. However, as a business owner, hiring a bookkeeper will be more beneficial to your business’s financial health. Hiring a bookkeeper will allow you to free up some time while the professional incorporates new methods into your existing strategies to improve your cash flow.
Don’t forget to stay on top of your invoices.
There are numerous cash flow management tips out there. However, none are more effective than keeping on top of your invoices. Doing so ensures that you don’t forget about your accounts receivables, primarily if you operate a B2B business. You’ll be able to send out timely invoices and thus receive payments to help your cash flow stay positive.
Furthermore, it would be best to stay on top of your accounts payable, as failure to pay your debt and invoices on time can lead to extra charges and penalties. On the other hand, if you’re able to maintain a balance between your accounts payables and accounts receivables, chances are cash flow management will become a breeze for you.
Follow a protocol when cash flow goes into negative
Sometimes, most small business owners will go through massive discrepancies in their cash flow projections. When such a thing happens, most of them will find it challenging to allocate funds accordingly as they’ve already failed to consider such a scenario.
On the other hand, intelligent business owners anticipate unforeseen situations. That said, an easy way to prevent cash flow drops is to utilize a cash flow management program or tool. Doing so will allow you to make more informed budgeting decisions while ensuring that your cash flow doesn’t fall into the ‘red zone.’ Furthermore, you can also avoid being affected by a negative cash flow by keeping some cash in a savings account for emergency purposes.
Assess your risks
Assessing your business’s current situation is of the utmost importance. It is a must to ask yourself whether you, as a business owner, can make certain business-related payments without incurring any risks. That said, if you don’t see any danger in doing so, consider paying for recurring expenses well in advance.
On the other hand, if you can identify risks, even minimal ones, analyze whether you can take a particular payment or not. Then, ensure that you can pay for business expenses on time. As a result, you will benefit from increased revenue instead of waving your profits goodbye.
Negotiate with your vendors and customers.
Negotiation is a business owner’s secret weapon when looking to manage business cash flow properly. So, consider negotiating your accounts payable with your suppliers and vendors and your accounts receivables with your clients. For instance, if a client owes you money and asks you to wait 60 days for payment, ask them to put down a fifty percent advance. Furthermore, if you want to purchase inventory from a supplier or vendor, ask them if it’s okay to pay for it when you receive it.
Ineffective cash flow management will eventually kill your business, especially if you own a small to medium-sized company. In fact, according to research, more and more businesses close up shop because of poor cash flow management methods and practices. However, avoid falling to the same fate by utilizing the cash flow management techniques mentioned above. It will ensure that you achieve financial supremacy sooner than later while experiencing a steady flow of profits!