Learning how to manage your business cash flow can greatly reduce the stress and unpredictability of being a business owner. After all, many businesses with healthy metrics in sales, growth and profitability can still run into major problems when their cash flow becomes unexpectedly restricted.
So what is cash flow? This term refers to the ability of your business to have liquid assets in its accounts — aka money that can be used freely to pay vendors, invest in improvements or cover any sort of emergency costs.
When a business has restricted cash flow, they may run into trouble when trying to satisfy accounts payable or even paying their own employees.
Prevent problems like this from occurring by using the following four tips for managing cash flow:
1. Set a Detailed Budget
Tracking costs already paid is a must for businesses that want transparent accounts, let alone ones that need to file taxes properly. Yet, while many businesses put their costs in nice little spreadsheets, they fail to use these same documents to anticipate costs in the future.
Bills, ongoing vendor contracts, inventory and payroll should all constitute fairly consistent costs that can be predicted using previous expense habits. By tracking these costs into the future, your company can maintain the reserves it needs to keep the lights on for several months at a time, even if cash streams dry up.
2. Bill Customers and Clients as Soon as You Can
No one likes to be seeming pushy, but being lackadaisical with your billing can mean your clients and customers will put off payment as well. Instead, bill them promptly and let them know exactly when you expect to get their payment within a final deadline. The more notice you give them, the less room they have to complain when you come calling on your final debts.
Arranging for a convenient payment system can help increase the likelihood of getting paid by these individuals. For instance, an online payment portal and email reminders can make the process a matter of a few clicks.
Also, keep track of customers with bad billing track records. These bad debts can rack up quickly and choke off cash flow mobility, so manage them efficiently or sell their debts to a collector (with proper notice) to keep them from clogging up your books.
3. Encourage Timely Payment with Clear Policies
Your company should have clear, explicit policies for late payment, such as a penalty or an automatic collection action after a set period of non-payment. You can even encourage early payment with discounts or incentives.
4. Forecast Future Cash Needs
Setting a budget of your predictable costs is certainly wise, but forecasting additional expenses makes you even smarter. Try to anticipate periods where you would normally be cash-poor, such as a time when business lulls or you end up having to pay vendors and contractors more than usual.
Pay particular attention to business plans like expansions or pricey programs such as promotional events so that you can have plenty of cash saved up in advance.
After Keeping Your Books Clean, Keep Your Products Clean with Omegasonics
Managing your cash flow is a critical step to maintaining the ongoing health of your business. Similarly, cleaning your machine parts and other items with Omegasonics’ cutting-edge ultrasonic cleaners can keep your equipment healthy and both your staff and customers feeling positive.
Take a look at our industrial and table top ultrasonic cleaners to find the perfect quick, efficient cleansing system for your business needs.