Cash Flow: How to Manage the Cash Flow of your Business
How to Manage Your Cash Flow
Managing your cash flow can be difficult, but manage it you must if you want to survive. If you don’t get a handle on your cash flow, it’s like trying to paddle a canoe upstream without a paddle. Here are some ways to ensure that attempting to manage your cash flow doesn’t wear you out.
The Elements of Cash Flow
• Accounts receivable: The amount you are owed by customers or clients.
• Accounts payable: What you must pay your suppliers.
• Shortfall: Accounts payable are greater than accounts receivable.
Know Your Breakeven Point
Knowing when your business will become profitable provides you with a target for projecting future cash flow. Forecasting your future cash flow based on historically sound financial data does away with guesswork and gives you a better night’s sleep. Cash flow spreadsheets that you can find online can help you manage your cash flow.
Have Some Backup
It’s inevitable that you will have some cash shortfalls and your survival depends on how you cope with them. Having some cash in your bank account will help you through these difficult times.
Encourage Faster Payments and Slow Down Payables
Do your best to keep net-30 and net-60 payment terms to a minimum. Delegate the task of contacting customers to remind them that payment is due to a staff member. Offer your customers discounts for early payments. Conversely, Get the best deal you can from your suppliers – net-60 or net-90 terms. However, be aware of possible late payment charges.
Incentivize Your Sales
Growing your business will not necessarily help you with your cash flow problems, but more sales are obviously good. So, think of creative ways to encourage more sales – host a customer appreciation event, sponsor a contest, offer rewards for referrals.
Keep Your Cash Flow Positive
As long as you manage your cash flow well and it stays positive, you can survive turbulent waters. However, cash flow problems are common for many profitable businesses. Desert Star Commercial Consulting can help you overcome your cash flow problems. Contact us for more information.