There has never been a better time with the beginning of the new financial year to take a look at managing your cashflow effectively. This can be crucial for the survival and growth of your small business. Planning, monitoring, and controlling the coming and going of the money for your business is important to ensure that you have enough to cover your expenses. Given the nature of the economy and the evolving business practices, staying up to date with the latest tools and strategies is vital.
It is important to know how your cashflow works within your business, you could manage your income and expenses by creating a cashflow forecast to include expected inflows from sales, accounts receivable etc and then your outflows such as operating expenses, inventory purchases and loan payments. Be sure to keep your cashflow chart up to date to reflect actual figures and also revised projections. Regular reviews of your cashflow management practices can ensure that they remain affective.
Monitoring your inventory can also impact your cashflow, excessive inventory can tie up your cash. This money could be used for other operational expenses rather than being locked up in stock that is just sitting idle. Well, stocked but not over stocked is the way to go.
Invoicing promptly can also improve cash collection. You may like to look at using an online bookkeeping tool, which will send invoices automatically and then follow up on unpaid ones. Having short payment terms could also help to encourage quicker payments. Details for these shorter payment terms will involve setting and communication clear and concise deadlines for payment from customers and this would typically range from payment on receipt of the invoice to 30 days after invoicing.
You could also look at incorporating a strategy of signing clients up for direct debits, this method can aid with financial stability by ensuring a more predictable income stream whilst mitigating the uncertainties associated with late payments.
Seeking expert advice from a professional adviser may help to significantly enhance your cashflow management. As accountants we can bring specialised expertise to your business’s financial operations; we can advise on strategies that will help to manage your cash inflows and help towards minimising your outflows. By assessing your financial status, we can tailor a plan with the aim to improve your cashflow, reduce unnecessary expenses and provide insights on tax efficiencies, to improve your overall financial health.