Cash flow acts as the lifeblood of any business. It indicates the total amount of money that comes in and goes out of your organisation. Maintaining a consistent, positive cash flow is critical to ensuring your company's financial health and well-being, and allows you to grow your business efficiently.
Accurate management of your business's cash flow equips you to prepare for slow periods, conduct hassle-free planning of your business finances, and still have peace of mind.
Read ahead to find some practical tips to help you manage and maintain a healthy cash flow for your business.
Identify your Business's Risks and Prepare In-Advance
Running a business can sometimes feel overwhelming as it involves facing new challenges every day. However, risk analysis helps you consider and prepare for several unforeseen scenarios. Not sure about how to do that?
Try this simple tip — Take an excel spreadsheet and enter all your cash inflows, and reflect a hypothetical situation by adding or deleting the inflows. This will allow you to analyse the repercussions in the following weeks and help you determine the right action plan to combat the situation.
You can also save yourself all the trouble and hire an accounting professional to help you plan and manage cash flow, keeping your business's best interests in mind.
Create a Separate Bank Account for Your Business
Small business owners tend to mix their business and personal account bank accounts and credit cards. However, creating a separate bank account for your business is strongly recommended.
You can also ask the bank to issue a business credit card. Once you receive that, make all your business-related purchases on that card, and pay using your company's account. This might seem unimportant at the initial stages of your startup but will be highly beneficial in the long run.
Finance Big Buys
Buying long-term assets might seem crucial to the daily operations of your business, but buying them using cash is a BIG NO! You may have a large sum of money right now, but when running a business, you should always stay alert for unprecedented emergencies.
You can also use your cash flow projection to proactively plan your business's financing requirements, or hire an accounting consultant to help you manage your business cash flow effectively.
Manage Your Credit Policies
Build robust credit policies if you offer regular credit to your customers. Following are a few strategies that you can implement:
- Send invoices promptly.
- Make timely follow-ups.
- Verify credit checks for all new customers before extending credit.
- Monitor your account to identify your late-paying customers and implement the right strategies to ensure timely payments and eliminate the risk of bad debts.
Use Technology to Make and Take Payments
Technology has made tracking and managing finances easier and better. Accepting online payments can help significantly in ensuring faster collection of amounts. Positive cash flow is crucial to your business's short- and long-term financial growth.
Therefore, a trick to make the best of your cash is by monitoring expenses, collecting payments promptly, and using resources that can make your cash flow management hassle-free.
Are you looking for a well-experienced accounting practice to boost your business growth? We are here to assist! At Chartfords Chartered Accountants, we work with our clients as an outsourced in-house solution to handle their various accounting needs. We are a professional accounting firm offering business advisory and coaching to help you structure your business for asset protection, tax benefits, and to save money. For more information, call us at 1300 163 817 or email us at .