How To Manage Your Business Cash Flow Effectively
|July 31, 2012||Posted by Ashley under Uncategorized|
The following is a guest post…
How to manage your business cash flow effectively
In any business, cash flow is of paramount importance. As the essential life blood of the company, it is important that you manage this cash flow effectively. This can often be difficult in a company, where money is constantly coming in and out. However, with a few simple tips you can effectively improve the management of such finances.
Before you can even spend money, you need to first collect it. This simple principle is behind many business strategies; for instance, it’s a great driving necessity for profit. To this end, you should quickly and efficiently collect any owed money.
This could be customers or other companies. The point is to not let income become a debt. This stops money flowing into the business, which will in turn stop money flowing out. To this effect, you should have some form of fast collection service, or incentives to receive money faster.
This may also mean allowing customers to get orders in quickly. Online commerce, or simply being able to fax orders, are both great ways to maximise the potential income as is using an online cash-based accounting system. Examples of this include Sage One’s Cashbook, which is specifically designed for sole traders.
Deposit cheques quickly
It may seem a small and simple point, but you should always cash cheques in as soon as possible. They may not disappear any time soon, but letting the cheque float for a day (or three, if you wait all weekend) can be risky. You should want the money in your account as soon as possible, so the rest of the business can carry on. Letting these standards slip will start a slow decline in profits or regular income.
Outsourcing to online accountancy
In terms of actually managing the accounts, many companies are turning to online services for accountancy purposes. A cheaper alternative to an in-house accountancy team, and often cheaper than an actual accountancy firm, these online services offer the best of both worlds.
By being online, your financial information is readily available day or night. This means you can simply check the accounts whenever you need to. This is useful in businesses which receive money constantly or international businesses where transactions often occur outside normal working hours. Sage One offers great online accounts management services which do not require the installation of software – so you’re free to manage your money without going through extensive training.
Similar to customer payments, you should manage your expenses effectively and, in most cases, quickly. With various bills, for example, paying them early may yield a benefit. At the very least it offers peace of mind and one less payment off the list.
With invoices, too, there are benefits for paying on time. Whether with customers or other companies, paying invoices quickly gets the whole process rolling quickly, which is sure to benefit the company. If you can afford something, there is little reason to wait, as you risk running into situations where planned expenditures are higher than expected incomes.