Small Business Technology

9 Ways To Manage Business Cash Flow

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Every business needs a steady flow of cash to keep running. Managing your finances properly has become a prerequisite for success, as a healthy cash flow means you can buy equipment, produce quality goods and services and pay your employees. If you have been wondering how to manage your business cash flow, here are nine ways. 

Determine your expenses 

The next step for managing your cash flow is to determine your expenses. Creating an accurate budget that tracks your fixed expenses like rent, salaries, and insurance and your unfixed expenses like supplies and inventory will help you decipher how much you spend weekly or monthly. Ensure you keep every record by keeping receipts in a physical register or using software or a spreadsheet. It is also important to stay within your budget for expenses once you have drawn it, so keep this in mind.  

Review your finances 

Reviewing your numbers can be daunting as a business owner, but ensuring that your business isn’t lacking financially or heading toward doom is necessary. You can review your finances by reviewing your statements and analyzing changes like fluctuations or inconsistent payments from customers or suppliers. Take note of debts or outstanding invoices, follow up on them, and implement renewed payment policies or plans. If your business is going under due to expenses and other factors, consider negotiating with suppliers for discounts or avoiding unnecessary expenses. You can also look for new suppliers who can give you materials or equipment at a much cheaper price. 

Hire a professional 

While running a one-man show might be tempting, hiring a financial expert or professional to handle all issues concerning your cash flow is crucial. They are well-versed in drawing budgets, planning, and spotting financial troubles. They are also experienced in providing accurate, objective, and detailed analysis of your business position. Further, a professional will help you review your finances and keep you accountable. Though it is an investment, hiring a professional will save you time, money, and resources. 

Use technology 

Technology has become one of the effective means of managing your business and cash flow. Several tools and technological resources can help you organize your finances, so feel free to consider this. An example is the cloud computing service which can help you automate tasks like payments and payroll or access financial data from anywhere in the world. To further enhance your business operations, utilizing a reliable HR payroll solution can be a game-changer. This solution allows efficient management of employee payrolls, contributing positively to your overall cash flow.  Instead of using manual ways to record your cash flow, you can use bank apps, accounting or inventory software, and automated systems to run your business seamlessly. 

Separate personal and business accounts 

If you are a small or growing business, one of the common mistakes you might make is to put your personal and business finances together. Though it might seem less stressful to operate like that, it can cause problems down the line. Adding your savings to your business account can make knowing how much cash you receive or spend challenging. It can also make tracking your financial progress and identifying specific transactions difficult. Also, it is crucial to avoid mixing these too so that you can present accurate information to future investors or stakeholders. 

Keep growing 

Another way to manage your cash flow is to keep growing as a business. You can increase your revenue to have enough cash to invest in new opportunities and cover expenses. Consider investing in the money market or other interest-earning accounts to help you compound more cash. You can improve your goods and services and find innovative ways to attract and serve your customers. Focusing on marketing strategies and strategic partnerships is important to generate more leads and increase profit. You can also diversify your business or expand to other areas to help you grow your cash. 

Borrow wisely 

Every business needs additional cash to grow. Due to this, seeking loans from banks and investors is not uncommon. However, to manage your cash flow effectively, you must borrow wisely to avoid paying high-interest debts and falling into debt. Before considering borrowing, you must ensure you inject the money into an important and profitable venture. Present a realistic financial forecast and ask for an amount you are certain you can pay back. Next, consider your options and settle for a lender that offers a reasonable payment plan and interest rate. When presented with the terms and to avoid misinterpretations and dire consequences. Further,  ensure you have a payment plan to help you pay on time to avoid extra interest. Before borrowing, you can also explore other loans like crowdfunding or grants and find the best fit for your business, so feel free to consider this. You can also work with venture capitalists or angel investors. 

Provide different payment methods 

As a business, it is essential to have different payment methods to make it easy for customers to pay for goods and services. Having one form of payment can disrupt your cash flow and prevent customers from buying from you repeatedly. Whether you are an online or physical store, consider electronic or online payments to make financial transactions faster and simple. 

Develop a cash flow projection 

Day in and day out, your business receives and gives cash. Cash flow projection is essential to help you plan your finances and make well-informed decisions regarding your expenses and investments. Also, it allows you to allocate funds effectively to various projects and put away funds for a rainy day. With a projection, you can identify financial problems early and solve them accordingly. You can also factor in future changes like increases in raw materials or salary increases. A business with a good financial forecast can easily secure funding from investors or lenders such as top fintech companies, as cash flow projections are usually required for the application process. 

Managing your business cash flow can help you manage your finances better, avoid financial crises and provide more cash for your business. And this can allow your business to thrive even in difficult situations. Considering these strategies, you can maintain a positive cash flow and boost your business. 

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