The old adage, “Cash is king,” holds true in the world of business. Cash flow allows you to operate, purchase products or services and pay your employees, among other essential parts of running a business. But maintaining a consistent cash flow isn’t always easy.
While you can’t completely remove the instability of cash flow, there are certain steps you can take to minimize potentially negative effects.
In the blog “Short on Cash? Follow These 4 Ways to Improve Your Cash Flow,” we discussed four ways that you can improve the cash flow of your small business.
Here are five more tips to manage cash flow so you grow your business.
Establish Payment Arrangement
Sometimes it feels like there’s a never-ending gap of time between the date you invoice and the date you’re paid. But in the meantime, your rent, utilities and other bills can stack up and stress you out.
It’s a common scenario for small businesses that can land them in unfavorable conditions due to a lack of funds.
Avoid this waiting period by introducing direct debit as a part of your invoicing process. The benefits will be twofold – it’ll minimize the cost associated with payment collection and you’ll have a stable cash inflow to pay your own bills.
Make Technology Work for You
Strategic use of technology can be a great help when you’re getting your cash flow under control. Cloud-based websites like OneDrive or Dropbox allow access to the stored files anytime and from anywhere.
Cloud-based accounting not only helps you save time, but efficiently tracks your business cash flow, as well.
You can also consider procuring some reliable accounting software with a solid customer support to manage your cash flow.
Your business assets aren’t just made up of office supplies and equipment. Your finished products, products that will be finished shortly and raw materials all fall under that category, and those inventories all need cash to be maintained.
Periodical reviewing your inventory can tell you a lot about your past, current and future cash flow. For example, having too much stock will require higher maintenance costs and may lead to a cash flow deficiency.
It’s important to have the right type and amount of inventory to maintain a stable cash flow and achieve sales growth.
Focus on Cash Flow, Not on Profits
Many small businesses focus too much on profit margins without having a look at their cash flow. Unfortunately, this is one of the most common reasons a business can fail, as your profits depend considerably on the money that’s coming and going. You need a stable cash flow to sustain your profitability.
One way to keep your cash flowing is to focus on the dependability of your clients, not their size. Small clients who are quick to pay and reliable are invaluable to any business.
Keep the Bank Informed
Banks can help you by offering useful services like credit or overdraft keep your bank informed in due course.
You should inform your bank for any unpredictable changes and outgoings in your cash flow forecast. It’ll help you avoid any unfavorable situation with the bank, and will act as an advance alarm bell for you, too.
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