If there’s one thing that can make or break your business, it’s cashflow. This is because monitoring the amount of money coming in and out of your business is critical for the day-to-day running of your venture, as well as planning for its future.
Cashflow management is therefore the key to long-term success, yet many business owners often don’t know where to start. Thankfully, we’ve put together the top 5 ways to manage your cashflow, many of which you can start today!
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1. Monitor your Cashflow Regularly
Businesses need to have regular assessments of their cashflow to prevent problems arising unexpectedly. For the majority of businesses, these reviews might happen weekly, monthly, or quarterly, depending on your circumstances.
Start-ups who are in the very beginning of their business journey would benefit from keeping a close eye on their cashflow daily, for example. Whereas a larger and more established business who has been experiencing success for a long time may only feel the need to assess their cashflow monthly.
To really keep on top of your finances, you can utilise online accounting software such as QuickBooks or Xero to manage cashflow on-the-go.
2. Cut Down on Unnecessary Expenses
Take a closer look at your expenses, particularly those which are recurring on a monthly, quarterly, or yearly basis. Do any of these figures seem unnecessarily high to you? Additionally, are there expenses here that your business no longer needs or uses?
These costs might include things such as payroll or employee expenses, which if not managed properly, can quickly cut into your bottom line.
3. Keep on Top of Invoicing
Over time, unpaid invoices can add up and have a devastating effect on a business’s cashflow. Therefore, it’s important to ensure you have the right processes in place to prevent this. Adding late fees, for example, encourages prompt payments from customers and shows that your business takes late payments seriously. Furthermore, you can offer discounts as incentives for customers to pay their bills before the deadline.
Regular payment reminders can also prove helpful, as sometimes a customer has innocently forgotten they had an invoice due. Additionally, consider payment plans if your late invoices are often for substantial amounts that a customer may find overwhelming to pay back at once.
4. Monitor your Stock Levels
Your stock levels also play a vital role in your business’s cashflow management. Try to review your inventory regularly to ensure you’re only purchasing and storing the level of stock you require – no more and no less. Excess stock can unnecessarily take up more storage, costing your business more money, while not having enough stock on-hand can affect sales and profits.
Additionally, you can modify both the quantity and timing of your inventory purchases to coincide with the periods of the year when your cashflow is at its highest.
5. Build a Cash Reserve
Finally, another great way to manage cashflow successfully is to build a cash reserve for your business. This sum of money will act as a buffer for unexpected expenses, as well as a pool of money that may be drawn upon for strategic investments or opportunities.
To determine the minimum amount of money this cash reserve should contain, calculate 3 months of your business outgoings, then put this aside for a rainy day.
Top 5 Tips to Manage your Business Cashflow Successfully [Recap]
When you're running a business, it is vital, that you manage your cashflow wisely. Here are our 5 top tips for business cashflow success:
Monitor your cashflow regularly
Cut down on unnecessary expense
Keep on top of invoicing
Monitor your stock levels
Build a cash reserve
