Smart business owners will always be the ones that stay on top of their cash flow management. By monitoring and reviewing their cash flow statements regularly they keep their fingers on the pulse of the business. Running your own business can often be like riding a rollercoaster. It’s essential that you understand your cash flow along with when money is coming in and out of your business.
In this blog post we have put together some top cash flow management tips to help you keep your business in the black. These tips will also help you boost your businesses cash flow, which is never a bad thing!
Review Your Cash Flow
Take the time to monitor your cash flow on a regular basis. We would recommend at least monthly, but ideally weekly. Online accounting software makes it really easy to reconcile your accounts and see where your cash flow and business is currently at. Cloud accounting means that your information is safe and you can easily view it from wherever you are.
To improve your cash flow management look at those recurring payments, whether they are monthly, quarterly or annually. Are there ways that you can cut back on your utilities or rent? Perhaps you have subscriptions to things that you thought you needed for your business but actually they have been things you haven’t used? What does your bank balance look like? Are there ways that you can renegotiate the terms of outstanding loans or leases? When did you last review your insurances? Are you paying for insurance you don’t need?
Line of Credit
Getting a business line of credit before you need one is a great way of protecting your business against any future cash flow problems. It may be possible to get a line of credit for a percentage of your accounts receivable. Alternatively, you could use your inventory as collateral. If you need help creating a line of credit, please contact us. We can offer advice and guidance to help you get the best line of credit for your needs.
It’s only normal to want to latest computer, smart phone or car with the best features. However, this latest technology comes at a cost. You can access the latest technology without tying up the cash by leasing these items. This means you get the items you need, but you pay on a monthly, quarterly or annual basis instead.
Keep On Top Of Invoices
Once the work is complete or the products have been delivered, make sure an invoice is sent for full payment. Why wait to get paid? When taking the work on, make sure you find out the name and contact details of the person paying the invoice. Ensure you are clear with your terms of payment so the client or customer knows what to expect. Make your invoices easy to read and even easier to pay.
Speed Up Payment
Think about things you can do to speed up payments. This could be a percentage off the invoice if the client pays their invoice early. Make sure you do the calculations in advance so when the client pays early, it is still worth the money for you.
Part Payments and Deposits
Partial payments and deposits are very common among the building trade and web designers too. Some business will charge a set fee at the beginning to confirm the work, another payment will be taken half way through the project and the final payment will be taken on completion.
Part payments and deposits are often taken to pay for the materials or workforce needs to complete the job. While part payments may be offered to help the customer, they can also help the cash flow management for the business too. You know what money you have coming in when, and it split over a few months or years.
Business Credit Card
Business credit cards are a great way of cushioning your cash flow. Take the time to find the best business credit card for you, For example, there are business credit cards that offer points and awards that can then go towards business purchases. Having a business credit card will also make it easier to categorise your purchases. You’ll find it easier to track your business expenses too.
Here at Financial Foundations Coaching we strongly believe that staying on top of your cash flow is key to ensuring your business succeeds. If you need a hand, just book a virtual meeting here and we can talk through it all with you.