Learning how to manage cash flow is one of the most important parts of running a business. With the right management in place, you can cut costs, streamline invoices and ensure that your vendors are paid on time.
The following tips on how to manage cash flow in business can help you get started.
1. Monitor Your Cash Flow
You cannot manage your cash flow if you’re not monitoring it. You can have an accountant do the managing for you or do it on your own in spreadsheets, but it’s far easier and more cost-effective to use accounting software.
Ideally, the solution you choose will have cash flow dashboards that allow you to:
- Easily view cash flow data
- Understand cash flow data at a glance
- Run reports
- Connect to other accounting solutions
Solutions like QuickBooks Online, Cash Flow Frog and Xero are all good options for monitoring your cash flow. Once you have the monitoring part under control, you can then take additional steps.
2. Cut Expenses
Costs for goods, utilities, employees and more will always have a negative impact on your cash flow. Monitoring your cash flow allows you to learn where all of your money is going each month.
For example, you’ll see money spent on:
- Subscriptions
- Payroll
- Rent
- Utilities
- Inventory
- Loans
- Etc.
You should go through all of these expenses and find those that you can’t justify. Perhaps the one SaaS solution is no longer used in your business, so you can cancel the subscription to save money.
You’ll also want to look through each expense because you may be able to negotiate better terms than you have to save money.
3. Secure A Line Of Credit
A business line of credit is one of the financial tools that you should use to your advantage. If you have an open line of credit that you rarely use, that’s acceptable.
However, having the money at your disposal if you need it is crucial to helping you keep your business operations running. You can tap into the money available in your line of credit whenever cash flow is low to satisfy your overhead.
Simply repay the lender and you have access to the credit. You can open an account at the institution that you currently bank with because it’s easier. The institute will have a history of deposits and can often make the credit decision based on this information.
4. Stay On Top Of Invoicing
Invoices are money waiting to hit your bank. Often, you’ll complete work and be stuck waiting on an invoice to be paid. You should work to stay on top of your invoices by:
- Automating sending invoices
- Automate sending invoice reminders
If you have a repeat client that fails to pay their invoices on time, you may want to discuss new terms with them.
5. Delay Payments To Your Vendors
Paying your vendors the moment that the invoice comes in may make sense if you’re flush with cash and don’t need the money. However, if you’re in the middle of a cash flow crunch, you’ll want to delay payments as much as you can.
You’ll want to remain cautious of paying late because this can ruin business relationships.
If you have a long-term contract with vendors, you may even want to consider renegotiating the contract to include:
- Discount if you pay the invoice in the first 10 days
- Longer payment terms
Vendors are often more than willing to negotiate terms with you if you’re a major customer or have a long-standing business relationship with them.
6. Start Using Mobile Payment Solutions
Fast payments will keep your money in your bank and help with your business’s financial health. However, you also need to make paying you as simple and straightforward as possible. One of the payment methods that make the most sense for business owners is:
- Mobile payments
Why?
Mobile solutions allow your customers to pay using mobile solutions, which they have easy access to on their phones. If you want to be paid rapidly, the easiest way is to find the solution that is easiest for your clients or customers.
Why is it important to manage cash flow? It helps you reach your business goals and maintain enough cash to pay your debts.