Small Business: How To Manage Cash Flow
Managing cash flow is critical to staying on top of the numbers; it can tell you how much is coming in and going out of your business. Below are a few tips on how to better manage and fully use your cash. With technology growing exponentially there is various accounting software that can be used to help business processes, get organized, and manage cash flow. Utilizing accounting software is simple and will speed up your data entry processes. They also provide in-depth and comprehensive financial reports to enable better decision making. As technology continues to advance, most accounting software now has automated processes for data entry which drastically reduces manual errors, saves time, and cost. Now managers and accountants have more time to analyze and manage cash flow.
More than anything else, smart small-business owners get paid on time! As you acquire new customers find out the specific person, email address to send invoices and direct phone numbers, so there is no time being wasted after the work is completed or delivered. Format your invoices so they are simple, straight to the point and easy to read. Make sure to include and draw attention to: due date, amount due, remit to information, and payment methods accepted. Also, ask for deposits or partial payments on large orders and long-term contracts. This way your company generates enough cash to finance materials, pay workers and operational expenses. Offering early payment terms is a great incentive to receive money early from your customers, take the time to calculate and ensure your profit margins will not take a loss from offering a deal. Another tactic to getting paid faster is by using mobile payment solutions. Utilize mobile apps (CashApp, Venmo, or Square) to accept payment on the spot.
Spread out expenses, so all your cash is not leaving your account at once, and open a high yield business account. Figure out how late you can delay payments to vendors without risking late fees or spoiling your relationship. This is not to avoid paying vendors all together, but to accrue interest. If cash is kept in your account until it absolutely needs to be sent out, the additional interest accrued can be reinvested into inventory or other operational necessities. Businesses that have proper inventory management processes in place on average upturn sales by 6%. Employing the right accounting software can increase knowledge management, by knowing when items were received, shipped, and when to order more. Having all this information handy can significantly reduce lead times and improve customer satisfaction which leads to increased sales. Not only can appropriately managing inventory increase sales but if incorporated effectively this process will lower costs and increase employee efficiency.
One of the most crucial tips is always putting money aside into an emergency fund. These funds will keep your business running during hard times or help you recover from an unplanned costly event. Ultimately this is the key to staying afloat and inevitably be something you will be glad you had done.