Constantly having more money leaving your business than coming in can be discouraging to say the least. We want to help you when it comes to managing your business cashflow, as it effects everything.
As well as recommendng you have your Online Accounting software in place, we’ve also put together a list of tips and strategies that we know will help your cashflow management
1. Create Cashflow Statements and Forecasts
Business Cashflow statements show you the amount of cash entering and leaving your business during a time period. It shows you how much cash your business actually has. It does not include the amount of cash your business owes or the amount owed to you.
You should compare several business cashflow statements. This can show you how your business manages cash over time. This analysis helps you make cash-flow projections. In this way you can see what lies ahead, and you’ll be able to prevent overspending resulting in negative cashflow.
2. Perhaps Adjust Your Payment Terms
Sometimes, negative cashflow is a result of customers not paying you. Extending credit to customers means you won’t obviously receive payment right away.
Establish payment terms in writing to let customers know information like when their payment is due, how to pay it, and when late fees apply. Shortening payment terms might be a good idea to increase business cashflow. Perhaps you can encourage customers to pay you early by giving discounts for early payments.
Don’t have standard payment terms that everyone else has. Be confident and make yours earlier, so that you can get your money in quicker.
Also, you could consider invoice financing or factoring to get cash from your unpaid invoices.
3. Make Sure You Have a Budget
You need to know how to create a business budget. A budget lets you predict the amount you will receive and spend. Sticking to your business budget is an important part of managing cashflow in a small business. It’s impossible to know every expense you will have over a period of time. Include the recurring costs and leave room for unexpected expenses. Using a budget can help you spend wisely.
You don’t know how much your business’s revenue will be, either. Look at your business’s revenue from prior years to get an idea.
4. Get Rid of Unnecessary Costs
Cut out any expenses that are frivolous. Review what you are spending and give careful consideration to if it is really necessary for your business. Then take a look at necessary costs, like rent, supplies, and salaries. You won’t be able to cut these, but you could shop around to see if there are better deals that can save you money.
For example, talk to other suppliers to see if they can give you a better price than your current vendor. Or, you could find ways to reduce cost-per-hire if you have too many hiring expenses.
5. Time Purchases
To make sure the amount of cash coming into and going out of your business line up, you need to time purchases. Timing purchases can be as simple as waiting to buy a piece of equipment.
Having expenses due and payable all at once can be hard. If you’re able to, spread out payment dates and purchases so you can better manage cash-flow.
6. Form Relationships
Forming relationships with your vendors, lenders, and investors can help them see you as reliable. Build connections early on, not when you need money.For example, if cash is tight, your vendor might work with you on payment terms so you don’t need to pay large amounts all at once.
7. Don’t Ignore VAT
VAT is often omitted on sales recorded and also bills to be paid. Therefore, at a glance a business owner may think they have a healthy working capital but some of this will be required to pay a VAT bill. Make sure any sales recorded include the VAT and that the VAT payments are also entered.
These are basic tips. If you would like more advice about how we can help you be more 'cash efficient' then get in touch with us on 020 3096 0306 or email email@example.com