The ability to manage cash flow is a thin line that separates a successful business from those that didn’t make it. Failure to manage cash flow is like paddling towards an unfamiliar destination without an oar. The chance to arrive at your destination is very lean. If you happen to reach your goal despite all these ambiguities, you might become too exhausted to step ahead of a little farther.
The moment you found yourself struggling to maintain a positive cash flow, you are not on the right side of the game. Despite how booming your business could be, a mismanaged cash flow can put an end to your business in just a drop of a hat.
As a hopeful businessman, you cannot let your business be trapped in this heartbreaking situation. Running out of cash is a big opportunity slayer. It holds you back from taking care of your major business expenses too.
Let’s face it. The problem of cash flow is a familiar challenge among all businesses. However, coming up against this financial test each month calls for an insistent cash flow management initiative. Rethink and make things right before it’s too late.
Tip #1: Forecast your inflows and outflows.
Have an idea of what causes your cash flow snag. Don’t pay bills or invoices blindly as they appear. It is necessary to estimate your business’s total monthly spending as to the utilities, rents, loan payments, and employees’ salaries.
Setting a rough calculation of your expected monthly revenue is equally important to projecting cash-outs. To be on top of your business on this aspect, accounting software can nail it. Trying to manage everything at your bare hands is nothing but a business suicide. Wearing too many hats including that of an accountant does not save you money but cause you more.
Tip #2: Have a tax specialist in place.
Tracking your cash-ins and cash-outs alone is not enough. As far as accounting software and cash management services are concerned, I am pretty sure that you can name one. These services include easy access to tax specialists who can help you grow your company.
The role of these professionals in cash flow management is vital since they make sure that tax penalties and interests are passed up. Having them by your side stays you on-track of tax return filing deadlines.
Tip #3: Pay attention to account receivables.
When it comes to invoices, be accountable to set it due immediately. A net term that goes beyond half a month is a no go. If you can’t find a way through it, simply have somebody to collect the amount due as promptly as possible. Having a credit collection officer for your business lets you closely keep an eye on accounts receivables.
Tip #4: Give out discounts for early payments.
As a way to collect payments before its usual payout terms, you may offer a pay early discount to your clients. The employee who handles credit and collection matters should, at all times, strictly tag on the eligibility guidelines that you have provided. It helps you avoid problems associated with account receivables in the future.
Tip #5: Limit your spending on business essentials alone.
As you forecast your cash-outs, you are likely to have a clear picture of the necessary expenses for your business. At this point, the next big challenge is for you to cut down non-essential expenses and costs until your business becomes highly profitable.
Tip #6: Hire the best talent.
At some point where you have to hire somebody to help you in your business, be clever in hiring. Choose someone highly skilled and knowledgeable. What’s the point of hiring two mediocre employees when you can have that one talent who can do all the tasks with flying colors But here is one thing though. Though they are hard to find, attractive salary and benefits can show the way to them.
Running a business is not about making money alone. To a certain extent, it is more of a financial management and cash in-cash out balance. As a businessman, it is your sole responsibility to ensure that business spending and sales are well-balanced. More than anything else, cash flow can make or break your business.