Talk to any business owner and they’ll tell you that managing cash flow can be a real juggling act. It’s one of the most common problems that cause business owners to lose sleep. If you can gain control of your business’s cash flow you’ll go a long way towards reducing stress. It will also improve your peace of mind.
5 Ways You Can Improve Your Cash Flow Management:
1. Know What The Main Triggers Are
Identifying the main triggers in your business will make a significant difference. For example –
- Invoicing your clients on time and sticking to your payment terms is vital. The more your customer owes you the harder it becomes to collect.
- Study your outgoing payments and note when they occur. This will help ensure you maintain a strong cash flow. Some key areas to consider are:
- Payroll for staff
- Finance including loans
- Tax liabilities
- Supplier payment terms and conditions
It’s important to be very clear about your ongoing business costs and the timing of these. You can then plan their payment in advance.
2. Be Aware Of Other Costs
Being aware of every cost to the business will make a big difference in solving cash flow issues. Knowing the impact of these will help you understand cash flow management. Over the course of a month or a quarter this kind of awareness can make a big difference.
3. Keep Your Suppliers In Check
It pays to review your suppliers’ services. Are they still relevant for your business? If they are, you should review their services to make sure they’re up to scratch. This can be useful in managing any increasing costs from your suppliers. At the same time, ensure you up-to-date and understanding their current payment terms.
4. Other Things To Prepare For
- Busy trading periods when staff wages increase. This especially so if you bring in casual workers.
- Upgrading or replacing equipment. This may result in a cash flow blip and/or increased finance costs.
- Bad debts due to customers going out of business. Avoid this by collecting payments and minimising the amount every customer owes you.
5. Know Your Cash Flow Position Weeks In Advance
We always recommend our business owners run a cash flow spreadsheet up to 7 weeks in advance. This can be as simple as an excel spreadsheet that takes minimal time to administer. The trick is to have a cash flow forecast that is visible, and one that you check regularly (daily if necessary). In this way you can see any danger spots and, with enough warning, eliminate them before they occur.
This alone, will make a massive difference in managing your cash flow. Stress levels too, will be much lower. You be able to take the panicked juggling act out of the picture altogether.