Managing Better Cash flow
We all know that cash flow management is vital for a growing business. But where do you start?
Here are six steps to managing better cash flow.
6 steps to managing better cash flow
Invoicing is a good place to start your cash flow management.
In other words, invoice your customers as soon as your product is sold or your service is provided. The quicker you invoice, the quicker you should get paid. Also consider asking for a deposit up front – especially if you’re a service provider or your product has a high-end price.
As we mentioned, invoicing is only the start of your cash flow management. Here are five other steps you can take to improve your cash flow management.
2. Know your numbers
We understand that not everyone is confident with numbers. That doesn’t mean you shouldn’t know your numbers.
Having appropriate accounting software in place, like Xero, will help you always know your cash position. The right software will also help you forecast your cash flow.
Having a good handle on your business numbers will not only help you manage your cash flow, it helps you take advantage of new opportunities.
3. Keep your numbers current
We mentioned having the appropriate accounting software in place. But that software is only as good as the information you provide it. Keep your information up to date so you know the financial state of your business at any time.
If you don’t have the capacity or capability to manage your accounting software, then outsource to a qualified bookkeeper. We will manage your books and provide insights and forecasting so you can better know your numbers and focus on your business.
4. Don’t be a pushover
Make sure your invoices are paid on time and don’t be too lenient with your customers. Keep an eye on your accounts receivable and have an invoicing strategy for any overdue accounts.
You may sometimes need to understand your customers challenges, but that doesn’t mean you should be taken advantage of. Be prepared to act sooner rather than later.
5. Save for a rainy day
Sometimes quick access to cash can make or break your business. Saving for the proverbial rainy day (in other words, building a cash reserve) can provide you with that access if unexpected expenses occur. Or an opportunity arises to invest in your business that’s just too good to pass up.
6. Separate business from pleasure
It’s essential that you keep your business and personal finances separate. Especially if you want to know your business numbers so you can manage and forecast your cash flow effectively.
Cash flow is king
Yes, “cash flow is king” is an expression we hear all the time. And there is a reason for that. Managing your cash flow effectively means that your “cash” serves you and helps you build a successful business.