The Steps To Proper Cash Flow Management
There are many challenges associated with managing a small business. Aside from following best practices to keep your business on its feet, you also need to make sure that your cash flow is properly monitored. Cash flow management is more than just ensuring that you have enough money for future business endeavors. For your business to survive, you have to manage accounts, collect and reconcile payments and send invoices. For seasoned business owners, these tasks are considered a breeze. However, if you are managing a fledgling company, each task is deemed daunting and challenging.
Even if you have a bookkeeper to take care of your finances, you still need to monitor business activities. Although bookkeepers make each task easier by ensuring you are stress-free around BAS time, being keen on the information on your financial report is essential.
Since many small businesses consider using bookkeeping software a better way to deal with numbers, why not use this practice to your advantage? As these programs provide features that enable you to capture information on receipts, track invoices and even generate reports in an instant, managing your cash flow will not be a difficult task.
Here is how you can work side by side with your bookkeeper in managing your cash flow:
Step 1. Plan Accordingly
You need to have enough cash for a rainy day. Just because your business is generating a decent profit does not necessarily mean you should be complacent. It is important to anticipate needs by planning accordingly. Ask your bookkeeper if you have saved enough money for monthly expenses, taxes, and other financial obligations.
Step 2. Stay on top of the bookkeeping game
Do not let bookkeeping stress you despite the fact that it is an insurmountable task. No matter how busy you are, you have to dedicate at least 30 minutes to the bookkeeping task. This way, you will know if there are some areas that badly need your attention. It prevents problems associated with BAS. Never allow these small problems to grow into a huge task.
Step 3. Provide incentives to customers who pay on time
Chasing customers is not an easy task. If you have customers who pay in a timely manner, giving discounts or incentives will motivate them to pay on time. Incentives are more cost-effective as compared with spending months following up on customers who do not pay.
Step 4. Pay more attention to cash flow than profit
There are businesses that are focused on profits, but the fact that profits naturally flow, you will never notice whether or not you still have enough cash for investments and expenses. It is important to pay attention to cash flow because without it, you will not be able to make future plans for your business.