If your business is struggling to manage a healthy cash flow it might be time to tweak your business management style. Relying on credit to pay for expenses is poor business practice and can lead to financial failure. Having a good cash flow will give your business what it needs to manage it better, as well as increase your interest rates on funds in the bank.
Here are 5 tips on how to manage your cash flow:
1. Be efficient
We suggest that as soon as you have quoted your customer and performed the task or provided the stock, send the invoice out without delay. The sooner you send the invoice the sooner you have a chance of being paid. This will increase your cash flow with your customers paying on time. Reminders are also essential. Be dedicated to “the invoice”.
2. Stock-take often
Doing your inventory checking is so important when it comes to keeping a healthy cash flow. If you neglect to do stock-taking on a regular basis, you risk the probability of having excess stock and buying more than what is necessary. This will affect your cash flow – however, if you know what’s going on, then you will buy only what’s needed, thereby decreasing your spending.
3. Offer a discount
If offering a 5% discount to customers who pay in seven days will increase the rate in which you get funds, then it may be worth offering a discount to those who are willing to pay early. Waiting for payment opens you up to the risk of having a low cash flow, whereas getting funds early or on time will increase your monthly cash flow.
4. Separate accounts
Separate your business account from your personal account. By doing this and by using a business credit card, you can manage your cash flow easier because you will have a clearer understanding of what belongs to the business and what doesn’t. By leaving the money in the business account, you can benefit from interest on that cash, and at the same time, you can still have access to it when needed.
5. Supplier payments
Of course, you want to keep a good relationship with your preferred suppliers. However, what we suggest is that you pay within the rules of the engagement. By this, we mean that you pay on the last day or the day before, unless the supplier offers a significant discount for paying early.
Follow these tips to assist with a cash flow increase in your business, leading to a healthier and more profitable operation. A better eye on your business’ finances will help them flow more efficiently. For professional advice on ways to manage the cash flow and other business management advisory, contact us today.