Managing your small business cash flow is an important part of ensuring that you have sufficient amount of money to pay your staff and contractors and suppliers, over and above building up cash reserves to invest in the growth of your small business.
There are a lot of tools in the market that assimilate with accounting software to offer a semi-automated forecasting, and this is something that a business should examine.
You may have weekly or biweekly meetings to discuss the financial forecasts of your business and know that where the pinch points are. However, do you actually go about improving the position and how? Here are some of the tips that you should look at in the first instance to improve your small business cash flow management.
- Only Borrow If There Is Long-Term Advantages
Borrowing money can be a sound business decision when accomplished strategically and with discipline. However borrowing cash without considering the consequences can lead to business adversity. Consider how you expect your business to benefit from the borrowed cash over the long-term and how you are to acquire the expected benefits.
- Plan the Use of Capital before Borrowing
Capital can be leveraged to help a small business grow, but it will not prevent you from crashing. You may use a short-term business loan or business line of credit to link short-term cash flow issues, but it could ruin your business with more debt if you don’t have a clean ROI or improvement plan. Make sure you plan out how the capital will help your small business before you are taking on more capital.
- Turn Unpaid Invoices into Cash
You can get cash without delay for all unpaid invoices due within the next 90 days to fill a cash flow gap at the same time as you wait on your customer to pay. This is referred to as invoice factoring, or AR Financing, and you may get a line of credit for the worth of your invoices.
- Keep Your Data Accessible
Small businesses receive an average of six duplicate invoices totaling more than $12,000 every month. If you are no longer tracking these closely, it’d be easy to make duplicate payments. Tracking it all will help you head off errors, oversights and glitches, and keeping all of that data in a single place will help your entire staff be on the same page.
- Mobile Payment Solutions
This in particular is suitable in case you sell products or offers services at your customer’s home or workplace. You can forget about invoices and rather get paid immediately with mobile apps that can use a smartphone to swipe credit and debit cards.
- Have Line of Credit on Hand
The usage of a business line of credit will come up with a cushion of available capital to use when it is required. The best thing is that you don’t need to pay for any portion you are not currently borrowing. You have to apply for a line of credit before you consider you may require it, due to the fact that it can work as an emergency credit line to apply as you require.
- Don’t Mistake Profit for Cash Flow
High profits for a specific month don’t always suggest that you have the cash in hand to pay your expenses when they are due. Make sure you establish efficient, clear and fast tactics to gather customer payments, and take benefit of any flexibility your suppliers or lenders provide you. Maximize the use of your profits in order to have the cash when needed.
- Implement Cash Flow Budget
A cash flow budget is an approximation of all cash receipts and all cash expenses which might be expected to arise throughout the set term. A cash flow budget helps you to consider through your business plans for the year, and it allows you to check those plans to observe if they have a possibility of success. If not, modify it before it fails.
- Build a Cash Reserve
You can use your own cash reserve or a line of credit to get you through the cash flow gaps. You can use the cash to pay off immediate debts that pile up from completing the work you are waiting on payment for, or to manage additional works without expecting payment of formerly finished jobs.
- Simplify Credit Cards Expense Tracking
Business credit cards can be a fantastic help for people who are about to start a new business as they can be used to track expenses from day one, and provide masses of opportunities, incentives and cash back rewards to your small business. Not only do business credit cards provide you with net-30 terms; however they can also plugin on your accounting software program and can preserve your expenses in one account. This can streamline your accounts payable method.