If I ask you what the cash balance of your business is right now would you be able to tell me? Or say I follow up with a question about what you expect it to be in the next 6 months would be able to make a good guess? Your business runs on cash and a good knowledge of how to manage that cash is relevant to the success of your business.
You might be interested in Why Cash flow is Important to Businesses.
Cash flow more than anything else should be paid more attention by business owners to stay up to date with how the business is doing. You shouldn’t wait till month end or the end of a quarter to know what your cash flow status is, by using cloud based software and accounting apps you can do a better job of staying on top of your cash flow and responding accordingly.
To help you be better able to manage your cash flow, here are a few tips to guide you:
- Evaluate Your Product’s Profitability– You must be able to ascertain that each of your products can generate profit, sufficient enough to sustain them. Your drive your drive to bring in more cash into your business and better understand your finances starts with an above par understanding of your product’s profitability. If your products cannot generate sufficient profit, no matter what you do, generating a positive cash flow will always be a problem.
- Get Paid Faster– you have to figure out a way to get paid as soon as possible. A few helpful things to do include; send your customers their invoice as soon as you can, why delay? Another thing you could do is offer your customers discounts or any other incentive if they can make their payments earlier and charge them late payments fees too. by doing this you are providing them a good reason to pay you now instead of later.
- Ask for Deposits/Part Payments– You don’t want to put 100% of your cash on fulfilling a customer’s order. Ask them to put skin in the game by sending you an initial deposit usually 25-50% of the order amount, this way even if a customer delays payment the risks to your cash is not as much.
- Control Your Spending– As you ensure that your business receives cash influx as soon as possible, you must also ensure that it is not losing that cash to unnecessary spending. By staying on top of your business spending you would be able to cut down, opt for flexible financing options or renegotiate expenses that have become unbearable or unnecessary. Another option is to tactfully delay payments to vendors that are not immediately necessary especially if it there are no late fees or other penalties involved.
- Cut Down On Excess Stock – Your inventory if not properly handled could cause you untold cash flow problems. To manage it properly you have to be able to use an inventory system to monitor and manage your stock regularly to avoid carrying excess stock that would tie down your cash.
These are only a few of the many tips you can utilize to stay on top of your cash flow and ensure it is better managed.
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