A Fresh Start
Cashflow Is the total amount of money flowing in and out of your business. When more money is flowing in than out, you have positive cash flow, when more is flowing out than in, you have negative cash flow. To build reserves and protect against disruptions, businesses should monitor their cash flow.
Although managing this can be challenging for SME’s, it is an important metric to follow – especially when forecasting the future growth of your business. The following tips can help you improve your cashflow:
1. Organize your Books
When your books are not organized, you are unaware of your flow of income, expenses and even profit. Once your books are in order, you can better keep track of your debtors and their payments. Seeking support from a financial manager can help your business eliviate these issues.
2. Forecast your Cash Flow
Cash flow forecasting is the process of estimating your future financial position. It is the fuel that helps your business grow. The money that comes in is allocated to your employees, suppliers and other expenses. If you are completely unaware of the future of your busines, you can expect to face challenges when planning your investments and identifying promising opportunities.
A business cashflow forecast, enables you to see in which months you can expect to see a cash surplus or deficit and get a good idea of how much cash your business will require over the next year to survive.
This also enables you to plan on how to spread out large purchases and investments such as; staff hiring, marketing campaigns or purchasing equipment, while your cash flow is not affected. Having several cashflow forecasts with several different scenarios will provide you with a range of solutions.
3. Stay on top of Invoicing
According to research, 64% of small business owners face late payment problems. If late payment becomes a recurring habit, this can be problematic for business. Efficient invoicing is a must for small businesses looking to maintain steady cash flow. Businesses should be clear on payment terms and follow up on unpaid invoices as soon as they are overdue.
4. Eliminating Bad Debt
Bad debts are amounts owed by customers that cannot be recovered. If late payment causes a cash flow headache, then bad debt can be a nightmare. Unfortunately, this is all too common for small businesses as well as startups and can be a significant risk to your cash flow.
CTC Accounting can help you improve and better plan around your business cashflow. Contact us to know more.