Proper cash flow management is something that is required in every business. It ensures both the current survival of the business and the future growth and development. Cash flow refers to the amount of money that flows in and out of a business. Cash flow management involves checking, evaluating, and fine-tuning company’s cash flow.
Every business owner needs to pay extra attention to cash flow. It is important to balance the financial assets of the organisation in such a manner that the organisation never suffers financial crises. If you don’t do it, your business may not be successful in the long run. In the absence of adequate cash flow you may not be able to pay your staff members on time. You may not be able to buy equipment to or materials if you don’t have sufficient cash in hand. You may face issues in marketing and your sales and business profit would be eventually affected.
If you want to improve the cash flow of your organisation, there are a few important things that you must do. At the outset, you must have a clear understanding of your organisation’s financial situation. Go through the past balance sheets to find out your company’s ingoing and outgoing finances. This is the first and indeed the most crucial step towards maintaining a healthy cash flow.
Make sure that you pay your suppliers on time. Late payments can result in extra fees and additional charges and may also affect your long-term relationships with your suppliers. This can have an impact on the future price negotiations.
For regular, set payments, you can use direct debits. The amount would be debited from your account on fixed date every month. This would not only reduce your time and hassle, but would also improve your credibility in the eyes of your customers.
You must review your cash receivables on regular basis. Ideally, at the start of the week you must review how much money is owed to you from your clients. Call up your clients or customers and remind them of outstanding payments. Do not hesitate in calling them because if you do not do it, chances are that they may take advantage of you.
No matter how well you plan things, there are always going to be contingencies and financial emergencies in business. In order to meet additional expense that may arise in a month, you must create a cash flow buffer.
Set aside taxes every month rather than waiting for the end of the year to pay off all the taxes. This would save you from any financial burden when your tax bill arrives. Ask your business accountant to give you tax estimate based on the monthly business reports.
These days there are many cash flow management software available in the market. You can use one to easily and effectively manage your organisation’s cash flow and to keep your business finances smooth.
If you want to grow your business, manage your cash flow or business finances effectively.
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