Running any business is hard work. It doesn’t matter if you’re just getting started or have been operating for years, the key to business success is in getting your cash flow right.
Without that, you can’t keep suppliers of customers happy and you won’t have a business. Fortunately, there are several things you can do to successfully manage the cash flow in your business.
Understanding Cash Flow
Cash flow is simply the funds flowing in and out of your business. To manage it you’ll need a list of all the expenditures and income, allowing you to assess when you need cash to pay certain suppliers. From this, you’ll be able to collect the funds together and pay suppliers as required.
Accurate cash forecasting also means that you’ll know when you can’t afford to pay a supplier and you can come up with a plan to keep them happy.
If you’re still not convinced how important cashflow is then consider this, statistics show that 82% of businesses fail due to cash flow issues. Getting your cash flow right can dramatically increase your chances of success.
Identifying the Issues
Most businesses struggle with cash flow at some point. Identifying the most common reasons for this happening will help you avoid the same pothole.
· Insufficient cash reserves to cover unexpected expenses
· Spending too much or having excessively high overheads
· Carrying more stock than needed
· Loans with high interest rates
· Customers frequently pay late
· Sales issues
· Insufficient profit margins
Fixing Your Cash Flow Problems
The good news is there are several things you can do to improve your cash situation.
Use an Invoice Factoring Service
There are several high-quality invoice factoring services you can utilize. Make sure you choose one with competitive rates and no hidden fees.
Using one means you send them your customer invoices. The factoring company will pay your customer invoices directly to you. They will take off a charge for doing this. It’s usually a small percentage of the invoice value.
You will get your money virtually instantly, avoiding the issue of chasing your customers and giving you the money you need to pay bills. The factoring company will chase your customers for payment.
It’s simple and effective.
Streamline Your Admin
We understand, admin can be complicated, especially if you’re new to business. You’ll potentially need to manage payroll, invoicing, regulatory documentation, taxes, employee information, and so much more. It can feel like you’re drowning in paperwork.
However, you can take a moment to streamline your admin. Many of the processes, such as invoicing, can be automated. This will save you time and, more importantly, ensure your systems and information are up to date.
That will allow you to create accurate cash flow forecasts with all the information available.
Digitalize Your Marketing
Another large drain on your cash will be marketing, especially if you’re still using traditional marketing methods. It’s time to instigate digital marketing.
Traditional marketing techniques are generally only effective when you’re trying to attract local business. The internet makes it possible to attract customers from anywhere.
Going digital will save you money on traditional marketing and potentially increase your customer base. Both of which are good for your cash flow.
Get a Bookkeeper
You’ve come up with a brilliant business idea and have the vision to make it a success. That doesn’t mean you’re a bookkeeper or even good with money.
Get someone who is to monitor all the incoming and outgoing transactions. This does two things. Firstly, you can get a report at any time illustrating when you may experience cash flow issues. Secondly, the bookkeeper creates a second person who needs to sign off on purchases. That makes it harder to buy things on a whim and spend money the business doesn’t have.
Reduced Overheads
Managing your cash is all about maximizing income and minimizing expenditure. Pause and take a review of your expenditure. You’ll find there are things that you’re paying for and don’t need. Equally, there will be some things, such as insurance, that you may be able to get for less.
Your bookkeeper should be able to identify where the business can save money. However, it’s a good idea to involve any employees as well. They often have the best productivity and efficiency insights.
Getting employees involved has the added benefit of making them invested in your business. When employees are invested in the business, and feel valued, they are less likely to waste money and more likely to come up with effective cost-cutting strategies.
Summing Up
Managing your cash doesn’t need to be difficult. In many cases, the best approach is to let a professional prepare the cash flow for you, allowing you to stay on top of what you do and don’t have.
That, coupled with an invoice factoring service and building a cash reserve can help to ensure your business always has the funds it needs, an important ingredient of your success.
