As we conclude the Create Consistent Cashflow theme for the quarter, it is only fitting that we look at some practical ways from an accounting point of view that will help you do this too.
Constantly monitoring your cashflow is the most important aspect to it. You need to know how much money your company is collecting as well as how much of that money you have on hand to use. If you have an accurate idea of your cash flow in your business, then you can follow these simple tips to increase cash flow and manage it.
- Don’t wait to send invoices.
Again, a key reason cash flow matters is that it distinguishes between invoices you’ve sent and invoices that have actually been paid. That $10,000 invoice looks good on paper, but it means little if you don’t yet have the cash on hand to cover your expenses – don’t hesitate to send invoices!
- Adjust your stock levels as required.
Check your stock regularly to identify items that aren’t selling well. These can tie up your cash and harm your cash flow, as the cash you’ve spent to obtain them isn’t converting to sales and thus cash in the bank. You can address this cash flow issues by selling these less frequently purchased items for discounted prices at a clearance sale and not buying additional stock after you deplete what you currently have. Similarly, you can always invest more into stocking items that do sell well.
- Lease, hire or borrow to finance your equipment instead of buying it.
Even though it’s usually cheaper over the long term, buying new equipment and updating outdated equipment can be costly in the short term (not to mention time-consuming). Financing your equipment instead can lessen your short-term financial burden, particularly if the lease repayments are less than a loan payment. You won’t have to upgrade or try to sell outdated equipment that you’ve purchased. There will then be less cash leaving your bank in large lump sums, and you’ll maintain a more regular cash flow.
- Borrow money before you need it.
The best time to solve a cash flow problem is before it happens. If your business is running smoothly or is in the beginning stages of production, now is the time to borrow money. By opening a business line of credit/bank overdraft when your numbers are good, you can avoid the risk of rejection later. This will also provide you with resources to fall back on should you experience any growing pains associated with starting a business. A business line of credit/bank overdraft can be a lifeline for small businesses, particularly those impacted by seasonality.
- Re-evaluate your business operations.
Continually review your cost structure to find efficiency gaps that can be converted to increase savings. By identifying parts of the business that can be outsourced to freelancers and third-party providers, this will allow you to get the job done without providing salary and benefits to employees. Also look to scale back part-time staff during slow periods.
- Restructure your payments and collections.
Keep in constant contact with your supplies and maintain good relationships with them. Depending on whom you’re working with, you may be able to put off some payments to them until your business is financially healthy. Do your best to maintain a healthy relationship because it can help you avoid late fees.
- See where your money is going.
Taking on debt isn’t always a bad thing and sometimes borrowing money can be a temporary fix until your business is healthy enough to make it on its own. However, anytime you take on debt, you should carefully monitor and evaluate the extent of your cash flow – get advice if you can’t see where this is happening!
- Use current technology.
As a business owner, you should take advantage of technology, particularly artificial intelligence-enabled solutions, like new apps and software updates. These can streamline your business processes and increase efficiency.
- Consider your loan options.
Sometimes, all a business needs is a quick cash injection. Contact your business advisor to see what line of credit, business loan and other financing options are out there. Invoice factoring and invoice financing are also great ways to get advanced payment on outstanding invoices. It can help you get the money it deserves earlier than a customer is willing to pay. Remember, you should be taking on debt only if it’s going to help.
If you have any cash flow concerns, please reach out to us on 03-55612643 to check it out with you because we have the experience to quickly identify those issues and can provide solutions too.
Have a great day!
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