Do you want to know the secret to managing your cash flow? It’s all about balancing what you have coming in and what you are paying out. If you can do that, your business will grow without taking on debt or having a negative balance. These five tips will help get your business on track for better cash flow management, so it is worth reading them carefully!
Why Is It Important To Manage Business Cash Flow?
A business can’t survive without cash. It may not invest in new inventory, hire staff or grow its customer base if it doesn’t have the money needed to do so. Cash flow is essential because it’s an indicator of your current financial health and how much you’ll need for future investments. It’s also a key factor when figuring out what size loan you’re eligible for from banks or investors and being one of the most important factors lenders look at before approving loans to businesses with poor credit histories.
And finally, it will affect your company’s ability to make payments such as payroll taxes and rent on time (which could lead to penalties). Mentioned below are the tips to manage your business cash flow.
1. Utilize A More Smarter Tracking Device
A better way to track your business cash flow is by implementing custom invoices with a smarter tracking device. Smart devices like the “Yapstone” can help you manage and monitor all of your transactions in real-time, which will eliminate any chances of money going unnoticed. A Yapstone, for instance, has an ATM card reader that lets you swipe cards on the spot or take payments right from a mobile app so that every transaction goes through without delay.
It also offers reports detailing how much cash your company’s banking account should have at any given moment – important information when quick decisions need to be made about making purchases or paying bills.
2. Anticipate Moderate Inflow Periods
We can anticipate moderate influx periods by monitoring the cash inflow on a day-to-day basis. Monitoring your cash flow helps you predict better when money will come in and how much it will be. If we know that our next big project is coming up soon, then we’ll want to start bringing more cash into the company before that time comes so that there’s no risk of not having enough funds available for the job or purchase at hand.
Monitoring your business’ financial health also means being aware of what types of expenses are coming due in the future. By keeping an eye out for upcoming contracts expiring, for example, you may be able to get another contract from them if they’ve been satisfied with their service.
3. Plan For Charges And Crisis Costs
Certain things happen in a business that you cannot predict and can have costly ramifications, such as machine breakdowns or staff illness. Calculate how much money you’ll need to cover these costs, say $100 per day for the next six months. This will give your finance team time to find ways of raising funds before an emergency arises.
You may not even use all this contingency fund because emergencies should be fairly rare, but at least it’s there if you do need it. If something does go wrong, plan so that when the cash flow crisis hits, your company is agile enough to get out of trouble quickly.
4. Add Additional Products Or Services
The best way to increase the cash flow is by adding a new product or service. But it can be difficult for small businesses with limited resources, time, and knowledge of the industry they serve to make this happen quickly without sacrificing quality standards. For instance, if you have an idea that could fill in gaps in your current offerings, consider hiring someone on contract from another company who does offer these items so that they work as consultants till such time when you would need them permanently.
This person will know what inventory needs replenishing, what sales promotions should be run, etc.
5. Settle On Informed Decisions Related To Equity And Debt Financing
Debt financing is the use of borrowed money to purchase assets. Equity financing is when a company sells its shares, either privately or publicly on an exchange, to generate capital for business growth and expansion. Both debt and equity have pros and cons that should be carefully weighed before making any decision about which type of financing best suits your needs.
Both types of finance can help with cash flow by decreasing the amount owed at one time while increasing revenue streams through interest payments from loans as well as dividends from ownership stakes in the company.”
The Bottom Line
If you’ve been struggling to manage your cash flow, it may be time to take a look at what you are doing wrong. We have five tips on better balancing out the money coming in and going out of your business for better financial health. Give these pointers a try today!