Any small business owner knows that cash is the lifeblood of any business. When cash flow problem soften crop up, your company may run into more complicated issues down the road.
Managing your cashflow properly is crucial to the success of your business. To improve your cashflow management, you need to have the right tools and framework in place that will allow you to monitor the cash that goes in and out of the business.
Without such a system in place, it can be difficult for you to stay on top of your cash flow.
Not knowing how much cash you have can also keep you from building a savings cushion that you can use for unexpected expenses. And if you can’t keep track of your business expenses, you might be spending money that you don’t have.
If your business doesn’t have a healthy cash flow, you might not be able to pay your key stakeholders – whether it’s your vendors or your employees – and it can have a negative impact on your business in the long run.
Here are some ways to keep your cash flow under control.
(Remember that this blog article is intended only for educational purposes, and should not be taken as a professional advice on any matter. Consult your advisor or get in touch with our reputable accountants.)
1. Set up a process to make sure that your books are always up-to-date, as much as possible.
You can use an accounting software to simplify this process, or you can enlist the help of a reliable bookkeeper. This will help you keep track of how much cash you have, and how much you have to spend.
2. Work with your accountant to understand your cash inflows and outflows. Ask your accountant to help you prepare a monthly cash flow forecast so you are better prepared.
3. If you are offering goods, it’s important to have a solid process for managing your inventories .Know the true cost of your inventory to your business.
4. Establish a good relationship with your suppliers and vendors, as you might be able to get better terms for your invoice payments or even ask for discounted pricing.
5. Monitor your accounts receivables. If possible, set up an automated system that will allow you to invoice your customers immediately. If you have customers with past due accounts, don’t hesitate to go after them or even take formal action – as long as you can maintain a good relationship with them.
While it's good for you to understand how your accounting process works, you don't have to take charge of everything -- especially when someone can do it better for you.
Let our finance and accounting experts tell a story from your numbers so you can make data-driven business decisions. Contact us today to learn how you can get started.