Every business needs to access external funding at one point or another. Whether it is a payday loan from a direct lender to help you with your start-up or to grow your business, or a loan from a bank, you need to know how to effectively manage your cash flow. Once you have mastered this, you will begin to make money, grow your business, and take your business to the next level. Invoicing is a clear way to do this, but to maintain a healthy cashflow, strong revenue mustn’t be the only element you depend upon.
Listed below are some of the most important rules for managing your cash flow and making your business succeed, no matter what is thrown at you.
Don’t be Too Lenient
Although client relationships are important, it is essential that you do not become a pushover. By generating an efficient invoice strategy, you can reap many rewards. Also don’t fear taking formal action – business is business. Also ensure you keep an eye on your accounts receivable turnover. As receivables get older, their quality decreases. Act sooner and succeed.
Keep your books accurate and up to date
Your cashflow is only as good as your accounting. Ensure your accounting information is updated frequently and accurately. This allows you to see the financial position of your business with ease.
Your cash flow is only as good as your accounting and reporting. Don’t let this get out of hand. Make sure your accounting information is updated regularly. Then you can see the financial state of your business at a glance.
Keep your business and your personal finances separate
This is very important – you must understand your business cash flow and forecast inadeptly and bow it might alter. Mixing your business and personal finances is not advisable as it can leave you uncertain about the true performance of your business. Keep these separate so you can get an accurate representation of how much money your company is actually getting.
Keep your accounting simple
Accounting doesn’t need to be tricky. If you aren’t great with figures, hire an accountant who can manage this for you. You should also use only the highest quality accounting software, allowing you to confidently know your cash position. This will assist in forecasting cash flow for planning at a later date. A system such as this will help you to track and report on important business metrics, including aging receivables, inventory turnover and your operating margins.
Build a cash reserve
Having cash at hand when and where you need it is essential to cash flow. A reserve provides support if the unexpected were to happen. This doesn’t need to be a huge amount of money, but ig you can put something away, you can take advantages of opportunities or save your business when you need it most. Although this may mean you must spend a little less in the short term, a forward-thinking businessperson will ensure that they can make sacrifices to succeed down the line.