Money is the necessity of your business, meaning all financial obligations is forever ongoing and your constant attention is needed. It’s important to keep yourself reminded of what you can do in order to keep a healthy cash flow throughout the year, and if you’re in the middle of a start up, it’s important to make note of these things to keep an eye on for the future.
Cash Flow Analysis
Forecasting your cash flow is important in every business, but it doesn’t have to all be done in your head. There are many software tools available to warn you of any dangers ahead by assessing the history of client payments against how long you can put off making payments.
Accounts receivable and payable, credit term and your inventory are just some examples of key metrics that have a significant influence on your cash flow. By looking for analytical insight into these, it is easy to identify problems in order to solve them as quickly as possible.
Increase the speed of receivables
It goes without saying that you can only have a healthy cash flow if you’re getting paid, and there are a few things you can do to speed up the turnover on receivable income.
Reducing the price for prompt or early repayments and deposits on orders can get things going, while performing credit checks on new clients can give you deeper insight into how likely you are to be paid on time.
Clarifying payment terms will also ensure receivables. Things such as “Due upon receipt” is commonly used, but you could also say “Net 10” (payment due within ten days) or “net 20”, etc, in order to bring your money in at the necessary pace.
Chances are you sell your products or services via your company website, so it’s important to ensure it is running smoothly and is designed to function as quickly as possible on both desktop and mobile device formats.
What’s most important is that your customers are able to pay you at ease. Using an instant payment service such as PayPal is a great way for fast paced and smooth payment transfers. Don’t let the payment fee hold you back, user-experience is essential if you wish to see an incline of sales.
Keep on top of the Prices
It is easy to get ahead of yourself when you start to see growth, but being aware of your pricing and increasing costs will help you be prepared for any cash flow obstacles that may come your way.
Though you may be tempted to keep the prices down to keep in customers, a small hike is generally expected and will be respected by your buyers, given that you keep them informed of future changes in a timely, clear and reasonable manner.
Think Clearly about Stock
You may require specific specialist products and services from one business, but you don’t have to go to the same supplier for general items you will need on a daily basis. Big savings can be made if you opt to stretch your stock spends across various sellers, industry catalogues and more. Doing this will also mean you will be better equipped to face any supply shortages that may occur.
In terms of your own inventory, it’s important to avoid exceeding industry standards of what you may need. Though many merchants will offer large discounts on bulk purchases, they are only doing this for the sake of their own interests, not yours. Ensure you conduct regular stock takes and always keep an eye on how you can optimise you inventory to boost cash flow.
Aim High, but be Ready for the Lows
Unfortunately, tougher times have a much heavier impact on a small business than a growth period. In order to maximise cash flow and profit, it’s key to make sure you have you eye on any potential issues that may be on the way and put and end to it as early as possible.
Get a Reliable Accountant
Knowing where you’re going wrong with your business investments is important, and having a reliable accountancy behind you to help optimise your business assets is ideal when getting the most out of your cash flow.
Our team of professionals are here to help you make the best decisions possible for your business, so if you feel your business would bring in a better cash flow with a team of experts by your side, get in touch with Steven Glicher today to see how we can help your business grow.