(This is a contributed post)
There are not many things that are more important than cash flow for your business. If you have a healthy cash flow, then this will help you to pay your debts on time and it will also help you to sustain your operation too. Without it, you really are only a couple of missteps away from experiencing financial ruin. In this guide, you will be able to find out everything you need to know about cash management while also being able to incorporate strategies that work for you.
Cash flow management is essentially a series of strategies and practices that will help you to track, analyse and then improve the overall financial state of your company. The goal is to get you in the green so that you can experience a level of positive cash flow. In other words, you will have more money coming in than you have going out. When it comes to commerce, cash is king. You have to make sure that you can manage your finances well and you also need to make sure that you can keep your business afloat as well. If you want some tips that will help you, then simply look below.
Before you can even begin to work towards a good level of cash flow, you have to make sure that you know how much you have to earn. If you can exceed this number, then you are doing something right. If you happen to fall short, consistently then this shows that you have an issue that you need to resolve. If you need money to get started, small business loans may be an option.
If you want your business to succeed, then you have to make sure that you have a good emergency fund. This will give you some flexibility and it will also help you to handle any economic downturns. Ideally, you will need to make sure that you have at least six months of expenses put to one side. This will help you to safeguard your business far more than you realise.
It’s so important that you establish clear payment terms. You need to do this in writing before you take on any new clients or even a new supplier. Make sure that you layout when you expect the invoice to be paid, whether it is right away or whether it is within 30 days. If you have resource-heavy projects, then it may be wise for you to ask for an initial deposit. This will help you greatly as it means that you have some cash to cover any expenses. When you’ve set this term, ask for the remaining payment when you reach a certain milestone.
Most people think the secret to success is profit. This is true, but at the same time, it’s also about how you monitor your cash flow. Make sure that you check your earnings against the break-even number. If you are earning more money but you still feel as though things are tight then you may well have an issue with accounts payable.
At the end of the day, keeping track of your cash flow is a super important part of running a business. It shouldn’t be the only thing for you to focus on though. You need to hire an accountant to take care of this for you as it will help you to stay up to date with your numbers and it will also make it easier for you to focus on other, more important aspects of your company as well.
If you try and manage your numbers yourself then you may use a spreadsheet to monitor every transaction you have. In this day and age though, you have access to tech. Use it to your advantage if possible. Store any spreadsheets in the cloud and also make sure that they are very easy to access. You can also use free accounting software if you want. Either way, this will help you greatly with your cash flow.
Promotions are a fantastic way for you to boost your sales. You can easily run a contest, or you could start your own customer loyalty program. Either way, this is a fantastic way for you to make sure that you are not compromising your business through not getting enough work or projects in. If you find that you are getting too many customers at once, then don’t turn them away. Instead, offer them a discount if they are willing to wait for their work. This will help you to juggle a lot of different projects at once and it will also help you to get by without straining your resources.