Cash is King! And as we know, if you go too far in the negative your business will suffer and eventually cease to exist.
The timing of money coming in and out of your business can be a delicate balance but the sustainability of your business is dependant on it.
Aside from timing, positive cash flow management relies on accurate accounts and reporting.
So… be prepared! Make sure your accounts are up to date. Monitor your cash flow reports regularly to avoid unwanted surprises. This will allow you to see your cash position at any point in time and quickly identify potential shortages in the immediate future!
Cash flow reports will help you breakdown ways to improve your cash flow based on either your sales, expenses or in many cases, both.
You need cash to pay suppliers, loan repayments, employees and taxes. Ideally, money flowing in outweighs funds going out.
Effective “Accounts Receivables” management:
– Invoice sooner rather than later. The sooner you invoice the sooner you get paid.
– Make it easy for customers to pay you, offer payment options like Zip Pay or Afterpay
– Regularly follow up outstanding accounts
– Automate your invoice reminders.
– Consider offering early payment discounts & or late payment penalties
– Review payment terms. If 30 days EOM is too long, try changing to 30 or 14 days. from invoice date.
– Ask for deposits and progress payments for large work orders if appropriate.
Pricing: Does your margin cover your costs and then some?
Check your pricing. You can still stay competitive but do not sell yourself short. If the cost of inputs is going up, so should your price.
Inventory:
Overstocking can tie up significant amounts of cash.
Buy what you need, monitor inventory regularly and clear slow-moving stock.
Work your spare cash. Don’t let it sit there, put it in an interest-earning account!
