Cash flow is the lifeblood of any business, you might have the best ideas, strategies, personnel. If you can’t manage or meet the day-to-day need for cash to keep the business running, there might be issues. Some persons disagree with me and say profitability should be the lifeblood, I just smile and say, cash flow is amongst the reasons that determine whether you are still in business.
If there is no cash flow, you can’t take care of unexpected costs, pay your creditors, maintenance of plants, equipment and so on that creeps up. Also, there are some issues beyond our control like seasons, pandemic, disaster, government policy which might affect your cash flow. In solving this need, there are different steps that can be taken to arrest the situation. The earlier the better.
This can be handled for you by using world-class software trusted by over 6.1 million businesses worldwide. Click here to get started.
4 TIPS TO MANAGING YOUR CASH FLOW
1. BUDGET OR FORECAST:
This very important task is most times overlooked by small businesses or startup. You need to forecast what your spending would look like and also track it. This will keep you prepared for the forecasted future, if there would be a crisis, this will give you time to prepare for it e.g. renegotiating a payment plan, borrowing, prioritizing expenditure, loans, etc. you just to do what fits your business.
Not doing this can cripple a profitable business or destroy a start-up in its early stages, a good thing is that it can serve as a form of business analysis for the year.
2. GO AFTER RECEIVABLES OR DEBTORS:
If I say all your debtors will pay on time, that would be a fat lie. As a business person, you ought to know you won’t get all your money when due. The question is what should you do,
· Give them flexible payment terms.
· Offer a discount.
· Charge interest for late payments.
· Just go after them.
3. STYLISHLY HOLD PAYMENTS:
I know in the above point; I mention going after debtors now you’re saying I should be one. To be honest and based on experience, you might have different payables but the cash might not pay all obligations, you’re forced to do a scale of preference thereby holding or delaying other payments. You as a business also need cash flow to keep you afloat. “Make sure you don’t annoy your suppliers by doing this or reduce your credit rating”. You can ask for
· Longer paying time or installment.
· Temporarily reduce your stock or downgrade.
4. DON’T OVERSPEND:
In simple words, don’t spend more than what you can handle before any buying decision, ask yourself some questions. Do I really need that amount of stock? Can we survive a few months before we buy more cars?
I would suggest a process should be in place to vet purchases and expenditures.
Conclusively, you need to constantly weigh your business processes and activities, while also vetting your purchases. All these can be handled for you by using world-class software trusted by over 6.1 million businesses worldwide. Click here to get started.
REFERENCE: Sage
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