A Few Great Ways In Which Your Business Can Manage Its Cash Flow
Sunday, May 3, 2020, 6:00 AM | Leave Comment
Cash flow is a simple concept that weighs your income versus your expenses over a set period and tells you whether you’re gaining or losing money.
If you gain more than you lose, your cash flow is positive.
If you lose more than you gain, your cash flow is negative.
It doesn’t perfectly identify how well your business is doing, because it can’t distinguish between meaningful losses and long-term investments that will pay off down the line, but it’s a valuable metric that every company should care about.
If you’re not already looking after it, it’s time to change that.
In this post, we’re going to run through some great ways in which you can manage your cash flow better, so let’s get to them.
-
Reduce operational expenses
There are so many regular expenses that go into running a business, regardless of the variety. Some can’t realistically be adjusted without damaging your prospects — employee salaries, for instance — but others can be significantly reduced with no negative consequences. You just need to be willing to negotiate, research deals, use technology smartly, and be patient.
For instance, if you rent office space, you could talk to the owner about getting a better deal. If there’s a possibility that you could move elsewhere, then you have leverage — and if not, you could offer a longer commitment in return for a reduced rate. If you spend on a lot of business travel, you could invest in a fuel card (here’s a good example from fuelGenie) to reduce fuel spend and make life easier for the drivers. The more you cut your expenditure, the better your cash flow will be.
-
Invest very carefully
Looking to the future is a smart move, but it can be a bad idea to expect too much from your investments. If you commit large sums of money to schemes that should pay off massively down the line, you leave your business very vulnerable: not only might you hit major financial problems before those schemes pay off, but they might never pay off at all.
Invest, by all means, but do so in a way that’s financially sustainable. Cover your costs, put a little into your savings, and put whatever’s left towards long-term investments. That will protect you from running out of money and seeing your operation grind to a halt.
-
Improve your invoicing
An invoice is a professional document that you need to take very seriously, yet some companies get used to being quite casual about invoicing. They view their clients as friends, and think it doesn’t really matter what the invoices say or when exactly they’re paid. This is a huge mistake. If you leave any room in your invoicing process for your clients to pay slowly, they’ll eventually start to take advantage of that by putting off their payment, leaving you in a difficult position.
You need to ensure that your invoices are crystal-clear about payment deadlines and the action you’ll take if those deadlines are met. You then need to confirm receipt of those invoices and hold the clients to account if they don’t meet your terms. And if a client is proving extremely awkward, sever the business relationship: in the long term, it’s better to get rid of a late-paying client, as it leaves room for you to work with more respectful and professional clients.
