Maintaining a good cash flow is important to a business for several reasons. When your cash flow is consistent, it’s easier to pay vendor bills on time and meet payroll obligations. Many companies prefer to use cash to address emergency issues such as damage to the office or emergency company vehicle repairs, and a strong cash flow makes sure that the money is on hand to keep operations going.
While it’s essential to maintain a good cash flow, it’s not always easy. Slow-paying customers and bad customer credit management issues can often slow cash flow — or even bring it to a halt. There are methods your company can use to preserve your receivables and have money on hand when you need it.
1. Use Your Business Plan
A good business plan allows you to use educated projections of revenue and expenses to develop an idea as to what your cash flow will be. Ideally, you want the numbers in your business plan to line up with your real operational numbers to help you preserve your income and cash flow.
Within your business plan are the methods you have developed to generate the revenue required to run the company. When you develop your business plan, update it regularly and use it to maintain your company’s cash flow.
2. Rely on Technology
Technology has helped to make business easier and more profitable in a variety of ways. Smartphone apps allow you to manage payroll and instantly invoice clients while you are in the field. You can also manage your customer payments while in the field, and use technology to ensure that your accounts receivables are always in order.
3. Bring in Expert Help
A business finance expert can be an incredibly valuable resource for maintaining cash flow, especially for a small business without an accounting staff. A financial expert can monitor your cash flow history and recommend changes to improve your receivables. An expert can also develop cash flow projections you can use pay invoices and put aside payroll deposits in a much more efficient manner.
4. Improved Project Planning
In the world of business, good planning is the key to success. Whether you are working on a marketing plan or developing the release plan for a new product, you must take cash flow into account for your project to be a success. It’s important to determine the cash flow needs of your projects as they relate to the company’s needs and then develop ways to properly balance the two.
It is important to develop organized methods of monitoring your cash flow in real-time for every project and to be aware when cash flow levels start to fall below your projected needs. As you plan each project, it’s very important to make sure that cash flow is a part of that process.
5. Explore Options
A proactive business professional is always willing to explore the options when it comes to company economics. Some of the more appealing options to improving or maintaining cash flow include requiring deposits on larger orders and offering discounts for customers who pay quickly. Backup options such as bank loans, selling assets for cash and invoice factoring should also be explored fully.
6. Improve Your Receiving
The most direct way to improve your cash flow is to get right to the source and improve your receiving practices. By utilizing an electronic receivables system, you can make all of the important functions automated and never miss an unpaid invoice. You should offer your customers a choice of payment options and always print your payment terms in conspicuous places on your invoices.
A business without a reliable cash flow is a business struggling to survive. Maintain your cash flow on a regular basis, and you will have the cash you need to run your business properly.
Learn how Fortune 500 Kindred Healthcare freed up cash flow by partnering with Mimeo to eliminate the pre-ordering and warehousing of print materials. “In our first year, we saved $75k in hard costs transitioning to Mimeo.” – Tracy Disney, Manager of IS Training – Kindred Healthcare