3 things you need to know about cash flow management

Cash flow management is the Bermuda Triangle for many businesses. The mystery behind managing your cash flow is to keep it central to everything you do. This sounds pretty obvious, but once business owners set up shop, they tend to want to run everything themselves – from day-to-day operations, marketing, people management, product development and accounts. To survive in business, especially if you’re in a competitive market, you need to understand how to manage cash flow. Read on for some of our best tips:

1. Put a cash-flow forecast together

Firstly, put a yearly budget together which shows your actual outgoings. This will ensure you have your yearly spend clearly outlined and will know when certain items need to be paid, including insurances, labor, rent and equipment. Once you’ve locked down your 12-month budget, put it into a monthly view and mark payments that will need to be made at least six weeks ahead of their due date. Factor in interest that will be owed, commissions and any other incremental costs.

2. Get better at managing revenue collection

Business owners like to think the best of their customers and service providers and expect that they will pay on time. Sometimes, this isn’t the case and so extra steps need to be taken to ensure you can address late payments and meet your running costs. You can get your customers to work to your conditions by invoicing immediately and setting clear 14 or 21-day payment terms. Also be careful with discounting, as you will need to factor in the amount or percentage of the invoice that you are giving away in your overall budget.

3. Make the most of your outgoings and expenses

It may seem like a good idea to make your payments to creditors before the due date. What many don’t realise is that actually paying your bill on the due date, not before allows you to earn more credit interest as the money is sitting in your account. That being said, make sure you do pay your bills on your due date otherwise the creditors overdue fee will outweigh any benefit received by keeping the cash in your account.

Want to know more about managing cash flow? Contact us for advice from our team of certified professionals.