1. Track your cash
Regularly monitoring cash inflow and outflow is vital to ensure that you have sufficient funds in your business account. You should have a designated person or team responsible for monitoring cash flow, especially when your income source is inconsistent, which could be the case initially. This will help you identify any potential cash flow issues and take corrective action before they become a problem.
2. Create cash reserves
A cash reserve is the safety net you need if something unexpected happens or you have money problems. Building a sufficient cash reserve can be challenging for small firms in particular, but doing so puts your company in a stronger position.
3. Take out a cash flow loan
In times of negative cash flow, you may be able to benefit from short-term cash flow loans. A cash flow loan allows you to borrow money and repay it over time with interest in scheduled monthly instalments. A merchant cash advance which is a form of unsecured load, can also help your business during times of trouble and uncertainty. Always take independent financial advice before taking on a loan.
4. Extend the payables period
Negotiating longer payables periods and flexible due dates with suppliers can help you improve your cash flow. By extending the payables period, you can delay paying suppliers and improve your cash flow in the short term. You can also negotiate flexible due dates to align payment with your cash flow cycle.
5. Bank on cash flow forecasts
6. Create cash flow worksheets
- Cash effects, which are used to gather data disclosed in the cash flow statement
- Balance sheet effects, which are used to evaluate changes in your business account balance.
7. Prioritise managing cash flow
Prioritising cash flow management is crucial for your business success as it ensures you have enough funds available to meet your financial obligations and invest in growth opportunities. You can improve your cash flow and overall financial health by setting clear goals and strategies, such as increasing cash inflow through more efficient invoicing and billing processes.
8. Leverage the cloud for better control
Utilising technology can help you save time and improve the efficiency of your cash flow management. Cloud-based accounting software, such as Xero, can automate many manual tasks associated with cash flow management, such as invoicing and tracking payments. There are also standalone services such as that provided by GoCardless, which enable you to collect payment via a direct debit mandate and minimise time chasing clients for payment.
9. Separate your personal and business finances
Doing so will enable you to have better control over your finances, manage business performance, and analyse the revenue generated over a period. This way, you can see how much money is coming in and going out of your business, making it easier to make decisions. It is also essential to keep accounts separate from a tax management perspective.
10. Work on your sales strategy and close more leads
Boosting sales is essential to maintain a steady flow of cash, increase revenue and ultimately drive growth for your small business. You can acquire new customers through various channels, such as marketing campaigns, networking events, and partnerships. You can also focus on retaining current customers through exemplary customer service and loyalty programs.