A successful business owner reveals how to manage cash flow well
October 25, 2018
For your company to grow, you cannot ignore the importance of financial management. Managing cash flow lies in encouraging customers to pay you promptly as you pay the suppliers and employees on time. You should delay cash outlays as much as you can to avoid getting short of cash. You can manage your cash flow through preparing projections early enough. Accurate cash flow projections prepared months before can help you detect trouble before it hits.
Cash flow projections are educated guesses that can help you balance crucial business factors. They can help you determine the payment histories of your customers as well as the patience levels of your vendors. It is not wise to make assumptions without justifications in business. Do not assume that it is possible to extend payables just like in the past or that you can account for the fluctuations when it comes to sales.
Add the cash that you have at the moment with what you expect to receive from other sources when making the cash flow projection. Bring together all the relevant information from service representatives, credit workers, salespeople as well as the finance department in your company. Think about how much cash you will receive in the form of interest earnings, fees for offering services and customer payments.
You should also know the exact dates of the upcoming cash outlays for you to be accurate when making the cash flow projections. Identify where each pound goes as you asses the rent, employee wages, inventory, and taxes. Some of it could also be spent on getting utilities, paying debts, advertising or even purchasing office supplies. It is only through the cash flow projection that you can plan adequately for the future.
Managing receivables also helps you boost your cash flow. You should aim at converting your supplies and materials into products fast for you to earn profits. Ensure that you provide discounts to loyal customers who settle their bills on time. Ask non- cash customers to provide credit checks as you eliminate old inventory. Ensure that the finance department is quick on issuing invoices and making follow-ups on customers who delay payments.
Sometimes, you may lack money to pay some of the bills. You may need quick loans to get you out of a tough situation. It is normal for every entrepreneur to experience such shortfalls but you can survive them by choosing payday loans from a good lender.
You cannot predict the future but you should be aware of the challenges that affect your business early enough. Early detection of problems can make a financial institution chip in. Alternatively, your suppliers can help you since they are interested in seeing your business succeed. Suppliers also know more about the company compared to other financial institutions, therefore, would be willing to assist.
Ensure that you inform them everything related to your financial situation and remain a good customer to boost the relationship. You can also raise some cash from selling some current assets such as machinery and equipment.