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With 2017 well on its way, this is a good time to take a quick look at your business’ accounting and cash flow management to see if there is anything that needs to be reviewed or changed.
As one of the major markers of your company’s financial health, your cash flow statement is a good guide to movement of money within your business. Remember, cash flow is one of the decisive factors that will help keep your business going.
While there are no magic formulas to increase cash flow immediately, there are some time-tested and proven practices that can ensure the cash flow remains positive. Listed below are four tips to increase your cash flow in 2017:
1. Customer is central; but ensure credit-worthiness first
The year 2017 looks like it will be focused on the customer; but make sure you do business with customers who will make payments or are credit-worthy. Whether you offer discounts or accept payments at a later stage, make sure your customers will not default.
2. Review overdue payments
One of the easiest ways to ensure you get payments on time is to follow-up on overdue payments. Late payments from as recently as November or December 2016 can also make a difference to your business’s cash flow. When you follow up on overdue payments, you help bring money into the business while also conveying an important message to clients that you are indeed on top of your business matters.
3. Better forecasting
As you ease into the year, it is helpful to arrange for money to flow in for business investments planned in the future. Cash flow forecasting helps you understand the situation of money at any given time in the business. While it is still not 100% accurate, forecasting gives a near-accurate account of the situation so that you can make informed business decisions regarding expenses and investments.
4. Ensure prompt collections
Because positive cash flow depends on timely payments, prompt collections can help a business avoid hassles such as invoice backdating or chasing debts. One of the ways in which you can ensure prompt collections is through timely invoicing. As businesses move towards cloud-based accounting, you can consider using software that also takes care of invoicing. If you are unsure of this aspect, outsourcing can prove to be helpful. Outsourcing will ensure invoicing is prompt and timely while streamlining the function to improve the process of invoicing and collections, eventually.
One last tip
Remember that your profit is finally about the money that is left after all expenses are paid out from your business’s revenue. Survival of your business eventually depends on liquid cash available with you; this is different from profitability. As a result, it is vital to ensure that your cash flow is on track. If you are unsure about accounting, consider outsourcing your requirements. This ensures timely cash flow for the business while helping you focus better on critical business development functions.
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