Ideally, you can run your business and have a lot of money flowing in at all times. But this is hardly the case for most businesses, especially those that are just starting. You would need to ensure that you have enough cash on hand for unexpected expenses, but you also have to be sure that you have the cash you need to pay for regular expenses, from rent to salaries and more.
As well as if you don’t have enough in your cash flow and clients don’t pay on time, this can have dire consequences indeed. It’s definitely essential to manage your cash flow, but how can you do this realistically and effectively? Here’s your guide.
Take advantage of forecasting
One thing you can do to have better cash flow is to take advantage of forecasting. You need to keep on top of your income and outgoings at all times, and you can do this with the use of an online tool for forecasting or even just a simple spreadsheet. Make sure to set your budgets and assess how well you are sticking to your budgets, and determine the effect of business or new employees on your cash flow so you can more easily foresee what can potentially cause issues or problems.
If you know exactly where your finances are and what your financial situation is, this can make it easy to create a contingency plan – and address potential problems with cash flow before they arise.
Make your invoices a priority
It would also be best to make your invoices a priority – send out your invoices as soon as the work is finished. Make use of emails to make it quicker and to keep accurate records, and do not hesitate to chase customers with late payments. It’s best to be as charming as you can be – but be firm and persistent as well. You should also invest in creating a template for your invoices that looks organised and professional, and ensure that it has all the details needed for legal and tax purposes as well.
Establish a cash reserve
Another thing you can do to more realistically and effectively manage your enterprise’s cash flow is to establish a cash reserve, as the accountants central London from established firms like www.gsmaccountants.co.uk will tell you. Do this as early as possible or as soon as you can. When you have cash set aside, you can, for example, put in an order for business stock when they have discounted prices, or confirm a new client or customer without having to delay whilst you try to borrow money. You often need to come up with one-off expenses and payments as well, from equipment to employee uniforms to office supplies to deposits – and this makes having a cash reserve even more critical.
Try to negotiate with clients on terms If you have large clients, they are often known for settling their payments slowly, so you have to prepare for this. Also, it would be ideal if suppliers can pay in a fortnight, but you should avoid payment terms that are more than 30 days. You need to balance your business’ profit margins with fast payments, and you should value even small customers or clients who regularly pay on time and establish a good relationship with them even if the profit you gain from them is small.
