Regardless of whether you’re running a big or small business, one of the requirements that stays the same is effective cash management – having a positive cash flow means that you’ll be able to:
- Cover your business expenses
- Invest in growth
- Weather any financial challenges you run into
Naturally, it’s easier said than done to simply ‘manage your cash flow properly,’ so we’ve put together a handful of tips to help you out:
Forecast Cash Flow
Put simply, this involves estimating what your incoming and outgoing cash is over a specific time period – which is usually monthly or quarterly. Start by taking a look at your business’s historical data and market trends so that you can make more informed predictions. Then, if you anticipate that you might run into some cash shortages, you’re able to take action early.
Monitor Cash Flow Regularly
If you’re reviewing your cash flow on a regular basis, you’ll be able to:
- Keep a closer eye on your financial health
- Quickly spot late payments
- Identify unexpected expenses
We’d recommend using accounting software like Xero or MYOB for this since they’re pretty useful when it comes to generating financial reports.
Manage Receivables Efficiently
To actually keep the cash coming in, it’s fairly crucial that you’re managing receivables in an efficient way. Whether you want to encourage clients to pay on time by offering early payment discounts or setting clearer payment terms, the choice is yours here. You could also think about using invoice financing or factoring so that you’re able to access funds before customers pay.
Control Expenses
It goes without saying that keeping your expenses in check is pretty important when it comes to having a healthy cash flow – make sure that you:
- Regularly review and subsequently cut any unnecessary costs
- Negotiate with your suppliers for better terms if possible
- Avoid over-investing in both inventory or equipment if you do not actually have a clear need for it
Access Financing
Generally speaking, you’re never going to be able to totally avoid coming into sporadic times of cash flow shortfalls, so having access to a business loan or general line of credit is going to be a lifesaver when you need a buffer to keep you ticking along.
Explore whether your business is able to apply for a government grant and research what other financial support is available to small businesses like yours – especially the ones that are offered by state or federal governments.
Working with Glance Consultants
Our team of chartered accountants here at Glance Consultants specialise in providing tailored financial advice for businesses across the country – contact us today to learn more about how we can:
- Analyse your cash flow
- Identify potential issues before they become problematic
- Develop strategies to optimise your finances
