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0113 246 1234

Our top tips to keep on top of your cash flow

Cash flow is the lifeline of your business. So, having a system in place to effectively manage it is essential.

Despite its importance, you might find it challenging to keep on top of your cash flow and to ensure its operational capacity.

Deciphering your cash flow

The initial step towards proficient cash flow management is gaining a comprehensive understanding of it. You must have an accurate depiction of your income sources and expenditure channels.

Frequently review your business’s financial statements and identify any cash flow trends. You might consider recruiting an accountant to assist you in this endeavour.

Swift invoicing

To maintain a consistent cash flow, it’s vital to invoice swiftly. Immediately upon delivering a product or service, issue an invoice to your customer.

The faster you dispatch your invoices, the sooner you’ll receive payments, ensuring a continuous influx of cash into your business.

Promoting rapid payments

Devise strategies to motivate your customers to remit payments earlier. These strategies might encompass online payment methods for immediate transactions, flexible payment terms or discounts for early payments. Quicker receipt of payments boosts your cash flow.

Efficient credit management

While providing credit can be a powerful tool to attract and retain customers, it can also immobilise cash if not managed effectively. Regularly assess your credit policies and verify their alignment with your cash flow requirements.

Management Tactics

Although the complexities of cash flow management can seem overwhelming, adopting suitable strategies can empower you to direct your business toward financial prosperity:

Cash flow forecasting – Forecasting involves anticipating your future cash inflows and outflows based on historical patterns and future estimates. It enables you to predict periods of cash deficits and make necessary preparations.

Contingency planning – Always have a fallback strategy. This could entail maintaining an emergency fund, securing a credit line, or other resources you can utilise when cash is scarce.

Effective inventory management – For businesses dealing with products, ensure you don’t immobilise excess cash in inventory. This involves stocking just enough to cater to customer demands without overstocking.

Negotiating with suppliers – Attempt to secure better payment conditions with your suppliers. This could imply extended payment periods or bulk purchase discounts, both of which can enhance your cash flow.

Effective cash flow management is pivotal to the successful operation of a business, especially during uncertain times. While it can appear intimidating, with the right strategies in place, it becomes significantly manageable.

Need advice on managing your cash flow? Contact us today.

 

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