Cash flow management has never been a minor problem for any business even a small one. According to Xero, it is responsible for more than 60% of businesses’ bankruptcies in the first 5 years. Even the kids now are trained to manage their small amount of money right from the primary-school ages. Hence, as a business owner, you also need to learn to control the company’s cash flow yourself. Make it become your habit and you will see the difference.
Better Cash Flow? What to do?
When you were a child, you might have an interest in earning money to buy all your favourite stuff yet you did not know how to manage your little earnings and spent them instantly without a second thought. However, things are different now as you are a business owner. What you need to do is not just decide what to buy or when to buy anymore. You need to find ways to speed up your cash collections, slow down payment terms, and get more sources of income. There are 5 actions that should be taken together:
– Improve client relationships (both current and new ones)
– Record everything precisely
– Keep sending invoices and invoice reminders as scheduled
– Define appropriate payment terms
– Apply fast & simple methods for payments and cash collections
In the modern business world, many transactions are not conducted face to face any longer. People buy and sell goods and services through the Internet with just one click. Online invoicing and paying will be the key to improving your cash flow management. With online accounting tools like Xero, you can easily change simple quotes of drafts into official invoices and send them to clients right on your smartphone. Those invoices can be set to auto resend after a period of time if the transactions for them are monthly or weekly or even daily. By receiving money more rapidly and structurally, your cash flow will be more stable and easier to control.
Remember that cash flow management is not as simple as what you do as a kid. However, with the right fundamentals, you can make it become “child’s play”.
Also, take a look at our How To Forecast Your Cash Flow article.
Talk to us if you have any questions.
