Whether your business is developing or going through tough times, managing your business cash flow efficiently is absolutely vital and, for many, the key to business subsistence. You’ve perhaps heard the figure that over 40 percent of businesses that go broke are profitable, but just run out of cash.
From a cash perspective, a business is like a sponge — it sucks in snowballing amounts of cash and, to get money out of it, you have to give it a good squash. If you are unable to manage the business, the sponge is likely to grow bigger with each squeeze, making it tough for you to keep it in your hand. Successfully managing your cash flow will ensure that your business stays right on track to achieve its objectives. Here are some ways to do that.
Set Business Cash Flow Targets
Preparing and maintaining a cash flow forecast is a great way to understand the flow of money in your business. The forecast should be regularly updated to get an accurate picture of how the business is performing. Set specific targets for credit controllers that will encourage them to work hard to achieve them and, as a result, will maintain a positive cash flow for your business.
Set Clear Payment Terms
Businesses that deal on credit are often more vulnerable to declining cash flows because of late payments or other issues. They must set clear and standardized payment terms and plans that must be regularly followed to ensure that business cash flow targets are met. Even businesses that only occasionally deal with credit should have a payment plan. If you are unsure about the payment terms yourself, it will be hard for your employees and even your creditors to correctly access the right time to pay. The payments will be delayed, which ultimately means a decrease in cash flow.
30 days is generally considered to be a good time to make a payment for many businesses. However, based on the type of business and market situation, you have the liberty to set your own terms and conditions.
Generate Quick Invoices
Certain factors to improve the cash flow of your business are in your own hands. If you are efficient, it is likely that the cash flow will be positive. Invoicing your clients is one of the deciding factors and the sooner you do it, the better. Typically, a client will take a week or two to clear the generated invoice and, if it is delivered late, you must expect a further delay. Therefore, set up an automated bookkeeping system that automatically generates and sends invoices right on time so that your business cash flow is unaffected.
Install Easy Payment Options
Offer your clients the quickest and easiest ways to pay you. Online payments are a better option than checks as they take more time to actually show up in your bank account. Linking your bank account with accounting software will make it easier for you to keep track of cleared and pending payments. It also allows for quick transfers as banks already have all of the information needed to ensure a safe transaction.
Use Technology
Cloud-based accounting software is a great time saver for businesses, as it has brought efficiency to almost every business function. Tracking the cash flow of your business is just a click away with the help of this software. You can see, filter, and prioritize credit payments, depending on your need, from anywhere. The ease of accessibility that is offered through these cloud-based accounting services is just unmatched. The data is automatically backed up so you don’t have to worry about any loss or theft.
The fact that everyone in your company has access to all of the information at their convenience automatically speeds up the overall process. By using technology in your business operations, you will observe that the business cash flow has also increased considerably.
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