Manage Cash Flow
It is essential for every business, big or small, especially for startups, to manage cash flow of the business accurately because one wrong statement can mean that the business won’t survive the next year.
Below we have listed down a few tips for the best way to manage cash flow for a small business. Following them will ensure that you are able to keep up with your cash management.
Find Your Break-even Point
Your business will break even when the sales you have made equal the amount of money you put in as an investment. When this value increases, your company will go into profit. On the other hand, if the amount remains below the amount of money put into the business, you will remain in a loss.
Do remember that no business reaches breakeven within the first month of existence. It will take some time, but your sales must increase, so you know that you are getting there. Plus, when you know your breakeven point, you will be able to better set your financial goals.
Give More Importance to Cash Flow Management
Even when you are earning a good profit from your business, you need to manage cash flow properly. This will ensure that no amount of money being spent in the business is being missed. It will also help balance out the income statement at the end.
Have Cash Reserves
Every business has its financial ups and downs, and your business, like every other, will also witness a slump at some time. In such a situation, if you do not have any cash reserves in your bank account, you will witness a lot of difficulty keeping your business afloat. Thus, it is best that you keep a cash reserve in your bank in case such a situation arises.
Make Excel Your Best Friend
The main working of your cash flow will be done on a worksheet in Microsoft Excel. Getting the hang of its use and knowing the formulas that you can use in this software will help you a long way when you are managing your cash flow.
Make Sure You Get Your Receivables Quickly
It is best that you assign someone to keep an eye on the receivables. Make sure you ask your customers to make their payments quickly and send reminders if they are late. Also, it would be a good idea to keep net 60 and net 30 terms in the contracts you sign.
Try to Get Payments on Time
The best way to encourage your customers to make the payments on time or earlier is by offering them various discounts. Also, make sure you do not give credit to anyone and if you do, enforce rules and follow them as strictly as possible.
Get an Extension on Your Payables
On the contrary to the receivables, you will need to get as much time as you can on your payables. There will be some suppliers who will give you time but will charge late fees, so make sure you make all payments on time.
Try Various Antics to Boost Your Sales
There are many ways that you can boost your sales; you can offer discounts, promote competitions, market the latest trends with the best prices, or even offer referral incentives.
Assign Someone to Monitor the Cash Flow
If you already have too much on your plate and have an employee who is trustworthy and good with finance, delegate the task to that person. Having one person solely handle cash flows will make sure that there are no errors.
Use the Latest Technology
There are various types of accounting software that have been introduced to make management easier. Make full use of such software, and you will be able to keep your content secure and updated.