Top 8 Cash Flow Management Techniques For Your Business
Cash flow refers to the money that comes in and out of your company, through sales and expenditure.
Once you have determined your cash flow, you will be able to see for a certain period what funds your company will have available.
Avoiding Shortages
Logically, most companies would need to avoid long periods with a shortage of cash. This ultimately affects your creditors and staff and you would not stay in business for any significant amount of time.
Analysis
It is important to do regular cash flow analyses. Doing so will enable you to see any potential shortcomings and over-expenditure, and to get an early view over the direction that your running financials are taking.
Improving the flow
You will need to learn how to improve and manage your cash flow. You can begin by looking at your customer structure. For example, instead of running your company on a sixty day system, try change your system to a thirty or forty five day standard system.
Credit Control
Ensure that your customers are aware of any changes you may make, and should they not follow your adjustment, then you have every right to charge penalty interest. There are some companies that would be a little wary of what may seem to be drastic, however, many business still work on a trust system, and very few customers would refuse you their business and take it elsewhere. Understand how credit control works, and implement it. This way you can ensure awareness of exactly where your money is, and to stop a potential problem as early as possible.
Following Through
Ensure that you are able to fulfill your orders. Do not make promises to customers and then not follow through. Bad service, false promises etc are always remembered. The quickest way to go out of business is to fail to fulfil bargains that you may have reached. Remember, you could have potentially avoided this if you had correctly followed your budget and understood your cash flow.
Credit Terms
Similarly, you could also look at your supplier structure. Try and get extended credit terms. It may seem a little contradictory after shortening your creditor terms, but we are looking at what is best for your company to continue growing and being successful.
Negotiation
Everything is negotiable. So negotiate your stocks, your prices, availability, stock holding etc. Make sure that you have all the necessary support from your suppliers. Remember, just as your customers are important to you, so you are important to your suppliers as a customer.
Capital Outlay
You could also relook at the idea of purchasing fixed assets outright. In other words, should you need certain equipment to create the product you need to make to get revenue in to your company, it may be more logical to either hire / lease the equipment or to purchase it through hire purchase. Remember, we are looking short term, so we are not looking at what the interest affects would be, but rather to save money now, and possible put a large outlay once the company is more established and stable.
Put these 8 tactics in play and your business should not just survive, it should thrive.
You are going to need software to manage the process of predicting your cash flow and expenses. Google for budgeting software or visit http://www.1234cast.com where you’ll find software and more articles on cash flow forecasting and budgeting.
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