7 Cash Flow Management Tips to Grow Your Business
Cash flow is the lifeblood of any business. The moment it stops moving, it is only a matter of time before you are on the road to financial ruin. Believe it or not, poor cash management is responsible for 82 percent of business failures. Looking for ways to improve cash flow in your company? Here are seven cash management tips you can use to help sustain operations and grow your business.
What is cash flow?
A business's cash flow indicates how much money comes in and leaves the company in a given period. When your cash flow is positive, you have more money coming in than going out, which enables you to pay your bills and cover other expenses. If you don't have enough cash flow, you simply will not be able to pay those bills.
How to manage cash flow effectively
We've compiled a list of some of the best methods for effectively managing your cash flow:
1.Save money by cutting costs
Do an analysis of your cash flow statements and see if there are any recurring expenses that you could reduce. This might include utility bills, rent, payroll transactions, subscriptions, or regular services. Whenever possible, try to cut costs or negotiate payments to reduce your expenses.
2. Keep emergency cash reserves
You never know when a cash flow crisis can strike. With the right backup plan, you can be sure of your financial security and have a source of reserve funds in case of emergencies.
3. Promote early payments
When a client issues an IOU, it is essentially the same as not having any money. Offering early payment discounts or special deals to your customers will benefit you financially.
4. Ask suppliers to extend the payment terms
Asking your suppliers if they are willing to extend their payment terms is another effective strategy for managing your company's cash flow. If your supplier currently requires payment within 15 days of invoicing, it might be possible to extend your payment period to 30 days. This will allow you to keep more cash in the bank to cover your own expenses.
5. Be aware of your break-even point
The first step to creating a positive cash flow is to figure out how much you need to earn to break even. Overcoming that break-even point is critical to the success of your business. If you can't do it, you might need the assistance of a business consultant to help you gain control of your business's big financial picture and move forward into greater profitability.
6. Use software instead of spreadsheets
In the past, monitoring your cash flow meant manually recording each transaction. Today, technology is at your disposal, so use it to your advantage! Use an accounting software like QuickBooks to manage your cash flow or upload your spreadsheets to the cloud for easy access.
7. Designate a cash flow monitor
Staying on top of your cash flow is a big part of running your business, but it is not the only thing you do. To free up more time, assign the task of monitoring cash flow to a trusted employee, a bookkeeper, or a business consultant.
Optimizing your cash flow can help your business turn profits faster, reach your goals sooner, and cut your operating expenses.
Looking for help on how to improve your company’s cash flow? Contact C.CAMPBELL AGENCY today.
Photo credit: Photo by Adeolu Eletu on Unsplash