4 Simple Steps To Managing Your Cash Flow

4 Simple Steps To Managing Your Cash Flow

A small business needs to ensure that there is a steady flow of cash by managing accounts, sending invoices to customers, collecting and reconciling payments. If these practices are not regularly followed, it will be difficult for your business to survive. Some businesses do not want to spend money on an external bookkeeper. However, if you are a savvy business owner, you will realise that a bookkeeper is going to be helpful in ensuring that your cash flow is properly managed. Aside from hiring a bookkeeper, it is also important to monitor your financial activity. This way, you will know whether or not you still have enough money to pursue your plans for the future. 

Once you have sorted your bookkeeping, make sure you manage your cash flow:

Plan ahead

You need to save cash for a rainy day. While it is good to hope for the best, it is also important to plan for the worst. This is why you need to anticipate needs by planning accordingly. If you have to pay for your monthly expenses, prepare enough money so you will no longer have to worry about a bill coming out of nowhere. 

Review your financial report

Your bookkeeper takes care of your income and expenses and you will know about your financial performance if you dedicate up to 30 minutes to the bookkeeping task. For you to stay on top of your bookkeeping game, make sure you check if there are problems that you need to properly address. When you have time for reviewing your report on a daily basis, you can prevent any task from piling up.

Encourage customers to pay on time

It is not enough that you send invoices as you also need to make sure that they pay on time. When you encourage timely payments, your monthly expenses do not have to suffer. You can give incentives to customers who make it a habit to make timely payments. This is more effective as compared to chasing late payments. 

Look for cash flow instead of profits

Many businesses have the tendency to focus on profits without realising that it naturally flows. For businesses to continue to survive, managing cash flow effectively is necessary. A business that is profitable does not necessarily mean that it has enough cash flow. You will still have to keep your finances in check. Avoid spending when you know you do not have enough cash to cover your monthly expenses. Monitor the money you spend on lunch meetings and occasional business travels. 

Tamara Deterding

Written by : Tamara Deterding