Small Business Tips: How to Manage and Increase Your Cash Flow

If you are a business owner, you have probably heard of the term ‘cash flow’ before. Cash flow involves the movement of money in and out of your business, and is an important indicator for the financial health of your business (positive versus negative cash flow).

However, as important of an indicator as cash flow is, it is often difficult to manage – let alone increase (boosting your profits through cash inflows). Keep reading to learn more about managing and increasing your cash flow, and how doing so can be of great help to your business.

How can you manage your cash flow?

When it comes to managing your cash flow, the simplest way to do so is to work with an accountant. This is especially the case if you are a large business (with large sums of cash inflows and outflows) or are unfamiliar with financial management in general.

An accountant can help manage your cash flow by providing you with a cash flow forecast based on data gathered about your business, as well as keeping an accurate record of all your business financial transactions with modern accounting software. Professionals such as a virtual chief financial officer may be particularly helpful for cash flow management services.

How can you increase your cash flow?

Increasing your cash flow refers to boosting your cash inflows or reducing your business spending. It involves a more strategic approach to cash flow – rather than the technical approach required for cash flow management. There are many ways – as recommended by accountants – which may help increase the cash flow of your business. They include:

  1. Invoicing earlier

Customers tend to pay as soon as they receive an invoice, and hence invoicing them earlier (provided you have completed your service or have delivered your product) may result in increased cash flow. You can send invoices electronically and automatically through accounting software, or manually through email. Make sure that your invoices are sent in a timely manner so that you can increase your cash flow as effectively as possible.

  1. Review your debtors’ report regularly

Another way to increase your cash flow is to chase up debt owed to you. Review account receivables routinely show you who owes you money, and how long their debt has been outstanding. Through this information, you can contact accounts for their cash flow owed to you, or offer incentives such as early payment discounts so that you are paid correctly. You may also look to impose penalties to discourage late payments.

  1. Analyse your spending

If you want to increase your cash flow, one of the simplest ways is to cut down on unnecessary expenditure. To do this, you will need to accurately analyse your spending and find out where you are losing value for money. Look carefully through your list of expenditures and consider whether or not you can make some costs lower, or eliminate them completely. An accountant may help you with this as part of their budgeting and financial advice services.

Managing and increasing your cash flow is an important part of running a successful business. Be sure to understand your cash flow and how you can increase your inflow so that your business can grow and you can achieve your business goals.

For more articles to read