Cash flow is the lifeblood of any business. It represents the total amount of money flowing in and out of your business. Maintaining a consistent positive cash flow is crucial to the financial health and wellbeing of your business, allowing it to grow efficiently.
Accurately managing your business’ cash flow can give you peace of mind while preparing for downturns and making business financial planning easier.
Read on for practical tips to manage and maintain a healthy cash flow for your business. Identify business risks and prepare in advance
Running a business can be tough as you have to face new challenges every day. However, a risk analysis can help you consider and prepare for some unexpected scenarios. Not sure how to do it exactly?
Try this quick tip: Use an Excel spreadsheet and enter all your cash receipts. Add or remove entries to imagine hypothetical situations. This will allow you to analyze the impact after a few weeks and determine the right plan of action to deal with the situation. You can also hire a professional accountant who can take all the hassle out of your business and help you plan and manage your cash flow while keeping your business’s interests in mind.
Set up a separate bank account for your business
Small business owners tend to have a mix of business and personal accounts and credit cards. However, it is highly recommended that you set up a separate bank account for your business.
You can also ask your bank to issue you a business credit card. Once you receive this, make all your business-related purchases using this card and pay through your company account. While this may not seem important in the early stages of your startup, it can prove to be extremely beneficial in the long run.
Financing Big Purchases
Purchasing long-term assets may seem important for the day-to-day running of your business, but buying them with cash is a big no-no. You may have a lot of money now, but when running a business, you should always be prepared for unexpected emergencies.
You can also proactively plan for your business’s financing needs using cash flow forecasting or hire an accounting consultant to effectively manage your cash flow.
Manage a Credit Policy
If you regularly extend credit to customers, create a robust credit policy. Here are some strategies you can implement:
Send invoices promptly. Follow up in a timely manner.
Verify the creditworthiness of all new customers before extending credit.
Monitor accounts to identify late paying customers and implement appropriate strategies to ensure on-time payments and eliminate the risk of bad debts.
Use technology to make and receive payments
Technology has made it easier and better to track and manage finances. Accepting online payments can be very helpful in ensuring faster collection of funds. Positive cash flow is essential for the short-term and long-term financial growth of your business.
So the trick to getting the most out of your cash is to monitor your spending, collect payments quickly, and use resources that make cash flow management easier.
