Top tips to better manage your cashflow
Whether you're in start-up mode or a large company, the management of cash flow is an important and often underestimated aspect of your business. Here are some top tips on how to manage healthy cashflow.
Managing cash flow is an important skill for business owners, and if you are not confident with the numbers, perhaps look at simplifying life by hiring an accountant. Advice from an accountant or other finance professionals can make all the difference in having a handle on cash flow. They will know what to look for and help make sure you are prepared to take advantage of business opportunities without the handbrake of insufficient cash flow. Most importantly, you can focus on what you are good at and let someone else wrestle the numbers.
If this is not an option or you want to take a hands-on approach, read on:
2. Make use of software, apps and automation
Technology has made it much easier to manage day to day tasks such as invoicing and allocating expenses. Getting on top of accounting software and tools can make life a lot easier for your accountant, and less time for the accountant equals lower fees, so there is a double benefit here.
Top accounting software such as Xero and Quickbooks have some cash management ability built-in, or you can use more specific tools such as PlanGuru, Float or Pulse. These may integrate with your accounting software and help forecast cashflow needs in advance.
3. Try to stay ahead of the curve
Seems obvious, but this can be harder than expected. By making sure invoices are issued promptly, the whole business will function better. Often in small business, there is a reluctance to 'chase' customers for money. Develop a polite yet effective approach with invoicing and reminders to keep on top of receivables. Keeping a close eye on this side of your accounting can avoid messy situations having to chase a customer or a now-dissolved business entity. In finance, speak bear in mind that as receivables age as their quality declines.
4. Set an example
Up to date books make it far easier to keep a finger on the financial pulse of the business, which means quicker responses to any changes. By paying your bills promptly, you can also expect better relationships with your suppliers and build good terms for future expansion. A good history of quick payments will also go a long way to receiving some leniency should an emergency prevent you from paying as per normal.
5. Plan ahead
Thinking of future costs the business might incur is crucial to any future growth. An opportunity to expand into a new market or launch a new product will likely need healthy cash flow and money on hand so make every effort to start building a cash reserve. Actioning this will also help counter any negative impacts of unforeseen events. For example, a loss of key staff or a shipment of goods could result in paying well over market rates to get replacements in straight away and therefore stay in business. Likewise, a sustained downshift in your market could mean a redirection of business focus, and again a cash reserve will be needed to make the transition. So start squirrelling.
6. Ask for help
Without dedicated staff looking after accounts, you may find it difficult to understand every aspect of what's is required. Ask for help wherever you can because some solid advice before taking action can save a small fortune in fixing mistakes. Your accountant or financial advisor can assist and may even give a degree of free information on some matters. Failing this, talk to business owners and friends, browse forums and gather as much as you can on what has worked for others. Remember that it doesn't have to be a struggle with the right help.
Disclaimer: Information is of a general nature. Please consult your Account or Financial advisor for advice.