If you have a business, one of your biggest concerns is going to be money. Not just how much profit you’re making though – but how well your cash flow system is. If you get big windfalls of cash every few months, that’s not going to be as beneficial as having it spread over that amount of time. Every business needs cash flowing freely through it, whether for bills, employee payment, repairs, or emergencies.
Here, we’ll give you a few actionable steps that you can take that could help you to solve this problem. Take a look:
Keep an Accurate Cash Flow Forecast
Without a cashflow forecast you can’t truly know whether you’re on track or not. Setting targets for 6-12 months to keep track of your finances will help you to avoid any issues or shortfalls. Using a spreadsheet is likely the easiest way to do this. Make sure you consider even smaller things in your forecast, such as estimating you’ll spend more on utilities during winter time.
Late Or Partial Payments
Outstanding payments are one of the biggest issues you will face when it comes to your cash flow. Around 60% of invoices are paid late, according to a study. More than 30% of SMBs are negatively impacted and spend an average of 15 days each year chasing payments alone. That’s time that could be much better spent elsewhere!
You can stop this from happening in your business a few ways. Allowing your customers to pay in installments, especially for large purchases, is a smart strategy for driving sales. That being said, that’s not necessarily great for cash flow either.
Getting a deposit up front can be a big help, and make sure you have an effective invoicing system in place. You want reminders, and you might even want to give an incentive for early payment. As well as that, having charges for late payments could also work. Running a credit check on your customers before you start the work makes sure they can truly pay, too.
If you’re still struggling to get payment from a client, using the best invoice finance company will help you to get your money.
Stay On Top Of Stock Management
Stock management is just as important as managing your cash flow. This way you will remain on top of items that you have left in stock and those that require reordering. This will be better for your cash flow because you won’t have all of your money tied up in stock.
You’re Growing Too Quickly
When just starting out, many entrepreneurs think that growing quickly is a great thing. However, doing it too quickly will actually be detrimental to your business. Cash flow problems will always appear if you do end up growing too quickly. You may have no money in reserve, and you may end up needing to hire new people before realising you can’t pay them because the client has not paid you yet.
Planning to grow at a steady rate is a much more sensible way of doing things.