Improving your cash flow not only makes it easier to plan and budget for future growth, but it also gives you the money you need to handle day-to-day business fluctuations.
These are a few short tips to help you improve cash flow in your business.
1. Create a cash-flow forecast
Forecasting your business cash flow helps offset uncertainty by predicting peaks and troughs in your cash balance.
This helps you look at spreading out big purchases and investments – such as staff hires, marketing campaigns or bank loans – so your cash flow is not affected.
2. Set up a payment policy
Introducing a payment policy will speed up the cash coming into your business. Keep your payment terms short to ensure you get paid as soon as possible, and clearly list your terms on all invoices.
3. Extend supplier payments if possible
Negotiate with your vendors to pay them within 30 to 90 days. While not all vendors may agree to this, this will give you more time to bill your own clients.
4. Use online tools
Don’t let invoices pile up. Consider using accounting software that will organise your billing schedule. Xero is an ideal solution in this regard.
5. Manage your stock levels
Regularly reviewing your inventory will reveal the costs and benefits of holding various stock items.
6. Reduce overheads
Negative cash flow is often found in fixed assets with ongoing monthly payments, such as vehicles and business equipment.
To help with this challenge, look at leasing company vehicles for example.
7. Have a backup plan
When all else fails, ensure you have a line of credit (overdraft for example) with your bank in case of emergencies.