The way you run the cash flow of your business can ultimately determine whether you will make it or fail. It doesn't matter how much revenue you generate if there is not enough money coming in to cover the expenses when they are due.
This is why staying on top of your cash flow can help you avoid financial stress and ultimately keep your business afloat. Here are 4 simple and effective ways to stay on top of your cash flow, and ultimately manage your finances wisely
1. Save Cash And Stay Liquid
Saving for a rainy day is a must for a company's long-term success. This is because unexpected expenses can and do happen, and sometimes you may need access to cash fast. Having a reserve fund can make all the difference when often inevitable things go wrong. Even a small percentage of your monthly earnings each month can help you stay afloat if ever you find your cash flow is tight. Think of it as the financial safety net that keeps you from falling into panic mode.
2. Keep An Eye On Your Money
One of the most straightforward aspects of managing cash flow is knowing exactly where your money is coming from and where it is going. Know your numbers at all time. Make sure that you check your income and expenses regularly, so that you have a clear picture of what is going in and what's going out and whether it's at a healthy level.
If you notice any payments vs expenses that are off balance, then this is probably a big indication that it is time to make some changes. Look for certain patterns like certain months being slower than others, so you can plan accordingly for these months and spend a little less.
3. Stay On Top Of Invoices
Sometimes customers don't pay us as soon as we would like them to. That is why you need to make it a habit of sending your invoices as soon as possible, and following up with any clients who are late.
While you are at it, you might want to offer certain incentives for customers who pay early. If unpaid invoices are becoming a problem, and it is affecting your cash flow, it might be time to tighten up your payment terms and set clear boundaries with your customers. You might also find that the reason people are paying late is because you are not sending out your invoices on time, consider using an invoicing software that will automate your invoicing and send automated reminders.
4. Be Frugal As A Lean Company
Cutting costs is often seen as a negative thing, as businesses are afraid this means they are going to be perceived as sacrificing quality. However, cutting costs doesn't necessarily mean sacrificing quality if you do it the right way.
It means being intentional about where your money goes, instead of simply throwing it around left and right. Try to look for areas you can cut back in, and try to make as many small changes as possible. Even the smallest changes can add up to big savings.
Cash Flow Conclusion
Managing your cash flow successfully is crucial, especially in today's volatile economy. Keep these tips in mind to keep your cash flowing in and not flowing out too fast!