In this blog, we cover the following:
If you are a business owner, you are already aware of how crucial cash flow is to your business. Cash flow is the lifeblood of a business. Why? Without proper cash flow, it would be difficult to continue daily operations such as payroll for employees, pay vendors, or even invest in equipment. Though most people would say look at the net income for that, without cash businesses die. Even if net income doesn’t meet your standards at the moment, looking at cash flow may actually indicate that the business is in a healthy state. So, pay close attention to the Cash Flow Statement as it can save your business from disasters. Here’s a blog where we go through how to manage cash flow in Quickbooks Online. Unsure of how to read a cash flow statement? Check out the following video.
Forecasting Cash Flow
Forecasting cash flow is estimating future sales and expenses. A cash flow forecast is a vital tool for a business because it will show if there is enough cash to run the business or expand it. The following image is how we set up cash flow model forecasts in Summit. Summit is (in short) a flexible environment that looks like a whiteboard where you can express financial operations. It has many functions where it helps do math in seconds. We will use this software along with other accounting tools to solve problems and answer the tough questions that clients and business leaders are struggling with.
How to Increase Cash Flow
Consider increasing your cash flow with the following:
Work With Vendors & Suppliers Vendors and suppliers become a crucial part of your business for inventory. If you have a good working relationship, consider renegotiating prices or asking if there are any offers/deals/discounts available as a loyal partner.
Reevaluate Spending It’s important to keep an eye on your expenses to make sure everything you have purchased is being utilized and not get left behind and forgotten. Manage your spending wisely as it can be cut down temporarily or if there’s legroom to have more.
Standardize Billing Life can get very busy. That’s why setting automatic recurring tasks should be a must, especially when it comes down to sending out invoices. It’s important to send out invoices on time every month and keep due dates consistent.
Make it Easy to Pay Sometimes having not enough payment options can be a make or break for potential customers. So, go the extra mile and set up more online payment types and don’t run the risk of losing them.
Utilize Invoicing & Accounting Software Automation is key if it can save a business more time and money. Options such as Quickbooks, Zoho, Freshbooks are all avenues companies can explore. At Financial GPS, we always say “we’re allergic to paper”.
Incentives & Penalty Policies By offering customers/clients an incentive, it can entice them to pay on time or early. This goes hand in hand with the opposite direction which is having a warning of penalties such as late fees.
Review Pricing Practices In whatever industry businesses are in, there will always be competition. Don’t price too high where losing money happens but pricing too low will also do the same.
Evaluate Marketing Efforts So many businesses would have been left undiscovered without the power of marketing and advertising. So, don’t go leaving out on the marketing side of business as it can identify and engage new clients while boosting growth.
Consider Selling Online If your business is considered brick and mortar, it is highly recommended to have an online presence to reach new audiences. There are also a variety of platforms such as Amazon, Etsy, and Shopify.