Cash flow is essential for any business, it’s the measurement and tracking of money that goes in and out. Cash flow is typically measured over a certain period to create a prediction for the upcoming time.
Your cash flow can lean in two directions: negative and positive. When experiencing positive cash flow, your business is thriving. In periods of slow or negative cash flow, it’s time to look into ways to improve cash flow in your business – and avoid the possibility of going out of business.
If your business is struggling to maintain consistent or positive cash flow, here are five ways you can improve the cash flow in your business today:
Part of a poor or negative cash flow in your business can be due to overdue invoices, unclear payment dates, or incorrect payment amounts. While this could be due to poor accounting, it’s likely that you’ve made a few mishaps in handling your invoicing.
The first thing you should do when trying to improve your cash flow is clarified your expectations for payments to your team and clients. This will ensure that your invoices are sent in a timely manner – and the same way each time – by your team and clients know exactly what is expected of them.
This is a great time to communicate due dates, late payment fees, payment options, and the extension application process. You can keep your invoicing consistent by using an automated program or accounting software such as Quickbooks.
It is very likely that your business is paying for more than it needs – or paying more for a service that could be swapped for better-performing, low-cost options. Other expenses pop up on occasion as well such as office space, phone plans, and even equipment. These expenses add up fast.
The time of money management is considered business expense management and should be a regular part of maintaining your cash flow. Take the time to cut expenses where necessary and invest in ones that will actually benefit your business where it is needed most.
Cash flow forecasting and cash flow projections are key to understanding your cash flow health and the performance of your business. Your cash flow forecast should be based on your goals, competitors, industry, and possible roadblocks you may face.
Keeping a cash flow forecast on hand will help you make educated decisions on the upcoming time frame in your business. Other benefits include understanding your buying power and marketing budgets based on the profitability of your business during that time period – and how you can best capitalize on your success.
Cash flow forecasting should be a forecast that you keep on hand and keep updated as time goes on. As your cash flow fluctuates, it is important to ensure your forecast fluctuates as well.
While buying is typically the best long-term option for your business’s bottom line, there is a time and place for leasing – especially during times when you really need to maintain your cash flow. Leasing equipment, supplies, and even real estate can be more expensive than buying, it can also allow you to keep cash on hand.
With leasing, you pay in small increments instead of one lump sum – which helps improve your cash flow. Lease payments are also considered a business expense and can be written off on your taxes.
Did you know that outsourcing your accounting can actually improve your cash flow? Keeping a dedicated accounting team can allow you to stay on top of your invoicing, profits and loss, necessary expenses, and more. Instead of attempting to handle – and search – for the best ways to improve your cash flow, your accountant can handle it for you.
With new-age accounting, also known as Client Advisory Services, your accountant can help you make decisions that may affect your finances – such as when or if to invest in aspects of your business.
If you are interested in learning more about accounting services for your business, connect with the ModVentures team today.