While it may not be an exciting part of owning a business, cash flow management is an essential aspect of it. Companies will face their challenges, but cash flow doesn’t have to be one of them. If you’re making a profit, there may still be discrepancies when it comes to your cash flow. By having specific guidelines in place, your business stands a better chance at flourishing.
Here are some steps for effective cash flow management:
Build the right tech stack.
With the advancement of technology and the number of financial platforms that are on the market, managing and understanding your finances has never been easier. Use one of the many cloud-based platforms like Xero, QuickBooks Online, and Jirav, to keep you in the loop of how your business is performing. Consider options that not only help you cut costs but analyze your finances as well. With the right tools under your belt, you can run your business smoothly and maintain clean and up-to-date records that will help you now and in the long run.
Keep your receivables low.
One of the best ways to effectively manage your cash flow is to keep your receivables low. Unfortunately, the act of doing so may not be that easy. Receiving payments from customers on time can be a hard task. Automating this process with tools like InvoiceSherpa and ChargeOver will ensure that invoices are going out regularly and on time. Your goal should be to receive payment before or shortly after delivering a product or service. Don’t be afraid to send follow up reminders on unpaid invoices or send them to collections if necessary.
Understand your financials.
When it comes to generating reports, including balance sheets, P&L statements, and cash flow reports, it’s essential to have a general understanding of them. Have someone on your team that can help interpret the data. A CFO can analyze reports and breakdown how your business is performing. They can provide some insight into areas that are underperforming and need improvement, various trends, and forecasting to aid you in your decision making.
Establish a line of credit.
If your business runs into cash flow problems, having an available line of credit can keep you afloat. Before borrowing, be aware of the terms and your ability to pay the funds back. Only use this option when it’s necessary. This option can come in handy if you’re awaiting payment from a client and need to cover overhead expenses.
From receivables to expenses, it’s crucial to be familiar with your business’s cash flow. Put the steps above into play to keep you on track and running a financially stable company. If you find yourself unsure of what to do or how to do it properly, contact us to learn more about how Acuity’s bookkeeping and CFO services can benefit you.