Many business owners would agree that cash flow management is not an exciting business aspect. However, cash flow management anticipates whether a business will struggle, flourish, or die slowly. For entrepreneurs, there is no phrase about cash flow management being the lifeline of their business, but they will pay valuable attention to ensure a steady and healthy cash flow.
Small businesses have a better chance of surviving crucial business junctions when they understand what cash they have flowing in and out. This requires an accurate forecast for future monthly expenses while tracking the money on hand.
With accurate cash management tools, new entrepreneurs can react to changing circumstances. Fortunately, business owners can easily access advanced cash management solutions with the available technology through business banking solutions. Here is a short guide regarding cash flow management.
Step-1: Never Allow the Clients to Set The Payment Terms
If you let your clients dictate payment terms, it will take no time for their cash flow errors to become your errors. Set strict payment terms and conditions, even if it means losing a potential client, especially when credit is involved and extended. Include specific timeframes for payments and late payment penalties in your contract’s terms and conditions section. Many clients will respect your decision and appreciate an upfront business relationship.
Step-2: Automate Billing Processes
If it requires more than one individual more than one day to recover an invoice, then you are wasting your valuable time and resources. Some clients may take up to 90 days to pay an invoice, so it might not be financially sound to manually gather or send invoices once a week or a month. Utilizing an automated billing process will diminish staff costs and accelerate the transmission of account receivables into cash.
Step-3: Automate Collections
For any stage of business, collections can overload resources and create significant errors in cash flow. Automate your account receivables system to provide your billing system with a regular report sorted by age and owed amount. This allows you to foresee impending cash flow problems and prioritize outstanding accounts. Ask your bank if an automated collection system would be a feasible option.
Step-4: Accept Online Payments
With the availability of budget-friendly online payment processes through a bank, including credit cards and electronic funds transfer. There’s no reason why a business fails to accelerate its cash receipts while reducing float. Digital payment options won’t only streamline the account receivables process, but they’ll also provide a secure platform against fraud.
Step-5: Keep your Cash Productive
Previously, businesses had to secure bundles of cash, and then the owners would have run to the bank to make a deposit. Your cash reflexively moves from the company checking account to a savings account regularly. This automated mechanism anticipates how much surplus money can be swept, leaving what is required for the next day’s payment. Putting the excess cash to work can add thousands of dollars to your cash flow every month.
Step-6: Examine Financial Reports
A significant part of managing the cash flow is appropriately comprehending your business and, for instance, understanding why the sales are ahead of the expectations or behind. Do you know the trends your business presently faces? You can easily find the related information by examining financial reports, including cash flow, sales, and profit and loss statements.
Step-7: Spot Warning Signs
There will be warning signs in your financial reports that might indicate future potential losses or cash flow problems. For instance, a productive client might ask you to temporarily reduce spending, which could influence your cash flow in the coming months. Currency exchange rates, government policies, weather, and a lot of various factors have an impact on the cash flow. As a business owner, you should be able to foresee these warning signs and create preventive measures accordingly.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.