woman looking at cash flow on tablet

How To Manage Your Small Business Cash Flow

Cash flow can be a significant problem for small businesses.

Even a profitable business can suffer from cash flow problems caused by late payments and poor control of your outgoings. As a business owner, you need to be able to control your cash flow situation to avoid damaging problems.

Take control of your business’ finances by learning how to manage your business’ cash flow.

Make realistic sales forecasts

Predicting your sales volume can be difficult without previous results to gauge interest and busy periods, leading to mistakes such as over or under ordering stock. It’s better to start with less stock at the beginning and to do your research thoroughly. As your business increases and you get more accurate sales reports, you can then increase your investment in stock.

Measure your cash flow

If you want to stay on top of your cash flow, you’re going to need to stay on top of it. There are some simple methods of analysing your cash flow that can help to identify problems early on and help you put plans in place. Ignoring problems will only make them worse, so always ensure your records are up to date.

Manage your invoices

As much as you’d like to think that clients will pay you on time, unfortunately this isn’t always the case. When your invoices are overdue, you can soon find yourself in negative cash flow, affecting your bills and other payments that are dependent on those invoices being paid. There are some strategies you can use to get your invoices paid on time, such as offering discounts for early repayment or adopting recurring invoices. Make sure your payment terms are clear from the outset, using due dates that can help you to manage your cash flow.

Be clever with your payments

While it’s tempting to settle your payments on the first day they’re due, waiting until the last day of your terms could be beneficial for your cash flow. Set up payments so that they automatically transfer on the last day of the notice period to give you time to get the funds in place. Choose suppliers with the most flexible payment terms to give you the best chance of being able to manage your payments effectively.

Have a reserve fund in place

A reserve fund is essential for small businesses in case of cash flow problems. If you can, keep some secure funds in place to tide you over in case of any short-term issues. If this isn’t possible, you might want to consider a fast cash loan instead. If you foresee long-term cash flow issues, contact your business or financial adviser to discuss your options.

To successfully manage your cash flow, you need to stay on top of all your business’ income and outgoings. Learn how to become more efficient for a more resilient business that can handle issues such as cash flow with ease and professionalism. Staying on top of your cash flow helps you to avoid costly small business mistakes, putting your business firmly on the path to success.

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