Managing a business is never easy. In fact, keeping a healthy cash flow alone may prove to be one of the most daunting endeavors anyone can undertake.
Of course, that doesn’t necessarily mean there’s nothing you can do to improve it.
With the right mindset, keen attention to detail, and the help of financial institutions and accounting professionals, not only can you manage the flow of money in your company but also ensure the growth of your business.
From learning the basics of cash flow to knowing the personal finance pricing for debt consolidation, here are the six all-time best tips on boosting your cash flow:
1. Understand the basics of cash flow
Improving something usually starts with understanding how it works and what it entails. This is also true for cash flow management.
Before finding ways to enhance it, you first need to understand that cash flow describes the movement of money through your company.
For most firms, cash flow can be tracked weekly, while others do it on a monthly or quarterly schedule.
Cash flow can also be positive or negative:
Positive cash flow
Positive cash flow comes from higher accounts receivables, sales, and other sources of money coming in the company than those going out, like monthly expenses, payroll, and accounts payables.
In short, it’s having more money than you need to cover operational costs.
Negative cash flow
Negative cash flow describes scenarios when you spend more money than what you earn.
In general, this translates to the businesses being in trouble. However, a negative cash flow can be mitigated and turned into positive with careful monitoring and by applying the other tips listed below.
2. Don’t focus on profit alone
While assessing your marketing profit and loss is important, you have to consider other aspects to determine the health of your business cash flow. The fact is, other financial figures could be affecting your cash flow, including the following:
- Accounts receivable
- Accounts payable
- Capital expenditures
To manage your business cash flow effectively, you need to pay attention to these factors as much as you do for profits and losses. Though the rules of accounting define profit as revenue minus expenses, smart entrepreneurs understand that earning a profit is not the same thing as having a positive cash flow.
3. Set key aspects of your finances on autopilot
Whether it’s business or personal finance, one of the biggest factors that could affect cash flow is missing due dates, as it will result in unexpected fees and penalties. There is also the matter of setting aside extra cash for savings.
Sometimes, people forget to do either of these not because they neglected to but because life just got in the way. Luckily, technology now offers ways to automate most financial transactions.
Automating bills payments
When you schedule automatic payments, you can avoid late payment fees, penalties, and even a markdown on your credit score.
Simply log onto your bank or credit card account, set up an auto-recurring payment, and you’re good to go.
Take note, however, that this may only work for bills with a fixed amount due. For those that don’t, you can simply set a bills reminder and input the amount and date of coverage manually.
Schedule automatic savings
Besides bills payment, you can also automate money transfers to your savings account every time you get paid through your savings or checking accounts.
4. Track your finances
Cash flow management means more than just balancing sheets and making sure that the math works out. You can’t possibly get a good grasp of your cash flow without highly detailed financial records.
And, as mentioned earlier, having a profit and loss statement is not enough. You’ll need to know how many invoices are still being processed, what bills you’re expected to pay, and how much money is already set aside for other projects in your company.
You can have your accountant or bookkeeper assist you or use spreadsheets or accounting software to anticipate outflows and inflows of cash over time, but the key is to start tracking the numbers now.
5. Improve your client payment system
For businesses, positive cash flow is affected by how regular and timely clients pay their dues. To improve your client payment system, you must:
Practice timely and fast invoicing.
Avoid wasting any time when you can already send out invoices to clients. If you let them know how much they owe you immediately, you’ll be able to save time and reduce delays from potential roadblocks you can’t control.
Remember: The more you delay sending invoices, the longer you’ll have to wait for them to pay, so make time for invoicing to improve cash inflow to your business.
Come up with different payment options.
For example, Airbnbs, rentals, hotels, etc., should invest in the best hotel payment system where cashless options like credit card and ewallets are readily available.
However, not all businesses use the same channels. The solution? Offer various payment options to make it easier for your clients to pay you.
Keep in mind that if you’re inflexible when it comes to payment methods, you’ll be waiting longer for the money you are owed to come to you.
Since most people make online payments for almost everything, it would be best to open such channels. This will also improve customer experiences, thereby increasing the possibility of repeat business.
6. Deal with high-interest debt
Before you can start earning interest, you must first focus on wiping out the ones you need to pay. While the best answer to this matter is to pay off all your debt, it can sometimes be impossible for some people.
If you owe big sums of money to different high-interest lenders, it may be stifling your financial progress. To make sure you see progress in your cash flow, you should consider consolidating your debt.
Debt consolidation is all about putting all your debt under one “roof,” making it more manageable and with an (ideally) lower interest rate overall. This can be done through personal loans in Saudi Arabia (or wherever you are), balance transfer credit cards, and other similar financial products.
Of course, this method can only work under the right circumstances or a combination of the following:
- Stable income source
- Sufficient credit rating for the requirement of the financial product you’re applying for
- Self-discipline to avoid getting into deeper debt
Better Cash Flow Means Better Business
Business growth isn’t just a one-time goal.
To make sure your company constantly progresses, you’ll need to have better cash flow continually. That scenario becomes more probable if you follow the best cash flow improvement tips of all time.