10 Tips For Successfully Managing Your Cash Flow

Did you know that poor cash flow contributes to 82% of business failures? Without a healthy cash flow, your company can no longer sustain its operations, pay debts on time or expand, leading to financial ruin. In this article, we highlight ten ways to manage your cash flow for long-term financial success.

1.    Outsource cash flow management

One of the most effective ways to stay on top of your cash flow concerns is by seeking CFO consulting services for your company. Outsourcing cash flow management to a CFO will not only help you to successfully manage your cash flow, but also manage your financial risks, and know when cash needs may occur. A CFO will also help you identify tax deduction opportunities, improve accuracy to avoid financial mistakes, and keep you up-to-date with your numbers, more so when you are going over or under the break-even point.

2.    Lease or rent equipment instead of buying it

While purchasing new computers, vehicles, and other company equipment is cheaper in the long term, it is often time-consuming and expensive in the short term. Renting equipment helps lessen your short-term financial burden, not to mention that leased equipment often qualifies for tax credits, which lowers your tax burden. This means that you will have less money leaving your business bank account in colossal lump sums, allowing you to maintain regular cash flow.

3.    Use incentives and promotions to increase sales

Boost sales effectively and quickly through promotions.  Develop a customer loyalty and referral program, improve publicity through social media posting, or run contests. Incentives can also help you control the influx of work. If you get more orders or customers than you can handle, you could offer clients discounts to customers if they agree to postpone the job instead of turning it down. This ensures that you have a steady stream of cash in the upcoming months. Additionally, ensure that you do the math before offering promotions and incentives to ascertain that the tradeoffs are worth the loss in the long run.

4.    Stay on top of invoicing

Cash flow distinguishes between sent invoices and those that have already been paid. A $5000 invoice means little if you do not yet have the cash at hand to cover your company’s expenses, so you should not hesitate to send invoices.

Instead of waiting for a month to send an invoice, consider shifting to sending it as soon as a particular project is complete. Determine the specific person, address, and job title to send invoices to prevent them from getting lost while being shuffled from one department to another, delaying payment. Be sure to make your invoice easy to read and straightforward while highlighting key sections such as the due date, expected amount, payment method, and where to send the money. You could further speed up the payment schedule by emailing instead of mailing the invoices.

5.    Reduce or delay expenses

While bringing in more money into the business is excellent cash flow management, reducing expenses can help you achieve similar results. Consider reducing your expenses by hiring part-time service providers instead of full-time employees to fill staffing gaps. Lease or rent out unused office equipment to minimize the storage costs. You could also embrace remote working to cut down the utility costs and rent.

Delaying supplier or vendor upcoming payments is also an effective way to ensure that money stays longer in your business account. Unless the vendors provide incentives for early fees, delay your payments for a few days or even weeks. However, ensure that you negotiate with the vendor first to avoid compromising your relationship or incurring late payment charges.

6.    Have an emergency fund

You cannot predict the future, so you should ensure that you set aside a certain amount of cash every month and save it into the company’s emergency reserve fund. This ensures that you have security and flexibility in the event of economic downturns. To determine how much money should go into your emergency fund, evaluate your monthly expenses, and then save enough to cater to at least three to six months worth of the outgoings.

7.    Obtain a business credit card

If you do not have a business credit card, you should consider shopping for one. Business credit cards offer great rewards, including discounts for business purchases, points you can use for business travel, cashback, and a cushion for lean financial times. A business credit card can also categorize your purchases, enabling you to track your expenses.

Be sure to look for a business credit card with ideal terms for your company regarding annual fees, credit limits, and interest rates. Choose a business credit card with annual fees and low-interest rates to be safe.

8.    Allow different payment options

Today, people no longer rely solely on cash to make payments. For this reason, you should allow different kinds of payments to stay competitive and encourage repeat customers. Being flexible with your payment methods also speeds up the payment schedule as customers can pay on the spot instead of waiting for cheques. It also allows impulse purchases, increasing your sales as a customer does not need to have cash in hand to buy. Regardless of the type of services and products you provide, embrace payments via smartphones and tablets or debit and credit cards.

9.    Adjust the inventory as needed

Be sure to check your inventory regularly to identify items that are not selling. Such products dent your cash flow as the amount spent to obtain or produce them is not converting into sales and revenue. You should avoid restocking or producing less frequently bought items after depleting what you currently have to address this concern. You could also consider selling those in stock at discounted prices. Invest more in producing or stocking items that sell well to increase cash flow

10.    Use the right tools

There are various artificial intelligence-enabled solutions and technological advances, including software updates and apps. These tools can increase your business’s efficiency and streamline processes, so you should take advantage of them. Consider storing your spreadsheets in the cloud to make it easier to access to monitor cash inflow and outflow. Accounting software such as FreshBooks can help you create budgets and stay on top of your company’s cash flow.

Endnote

Proper cash flow management plays a crucial role in your business success. Consider implementing the above strategies to stay on top of your company’s cash flow.