By Analytix Editorial Team
Maintaining healthy cash flow is a daunting task for even the savviest business owners. With poor cash flow management, it only takes one small downturn to cause your business to close shop completely. Fortunately, there are steps you can take to increase your cash flow and avoid potential problems.
Here are the best practices that steer you in the right direction:
Prepare Financial Projections
Forecast your expenses and anticipated revenues using cash flow statement and cash flow forecasts. Accurate forecasting helps you predict when you are likely to have cash and serve as an early warning system for potential cash shortfalls. Cash flow should be forecasted on a weekly and monthly basis to get an idea of a business’s current financial health. Additionally, once you know the costs, your break-even point serves as a ready-made target for projecting future cash flows and predicts when you’ll likely start making a profit.
Monitor Your Cash Flow Regularly
Cloud technology tools such as QuickBooks, Xero, or even niche industry tools like Insight360 make it easier to analyze cash flow regularly. They offer you the convenience and flexibility to monitor cash flow, generate reports 24 x7, and make projections frequently. Major variances should be investigated and promptly escalated to improve the quality of forecasts. Analyzing your cash flow also helps you identify issues early on and prepare a contingency plan for the future. Done well, it helps you stay on top of your cash flow, anytime and anywhere.
Implement AR Collection Procedures
Get customers to pay faster and use a “due upon receipt” approach to speed payments. Implementing collection procedures may take several forms. For instance, offering discounts as incentives for early payments or even charging late payment penalties for customers who exceed the due date. Here are a few ideas:
With cloud technology, you can access tools and applications that offer the same level of sophisticated data, previously reserved only for larger companies. Using software like QuickBooks as well as cloud accounting services you can take your business to the next level. Incorporating technology into your everyday operations helps improve efficiency and organize the data you need for tax purposes or critical decision making. Furthermore, invoicing process automation helps generate invoices faster, maintain accuracy as well as ensure better reporting.
The focus must not just be on increasing cash flows but also limiting your cash outflow. Review and revisit your costs regularly and look to cut costs. Remember, you’re in this for a long haul, therefore you should maximize the value out of every expense.
At Analytix, we incorporate technology to deliver customized data-driven financial insights that help effortlessly manage your business cash flow. Moreover, our Insight360 business management portal consolidates data and provides you with access to all this information right at your fingertips. With these cash flow management strategies, you can stay in control of your finances.