Your Business’ Cash Flow Is Its Bloodline – You Need to Know Your Basics If You Want Success!
Many owners of small businesses will undoubtedly agree that of all the aspects of business, cash flow management ranks as one of the least exciting. However, cash flow management in a small business can e a determining factor in the success or failure of the company. There’s truth to the cliché that cash flow is the business’ lifeblood. And this holds true for companies of any age and type. It is thus immensely crucial that enough attention is given to the cash flow of any business, and we touch on how this can be done.
Managing Your Cash In
Don’t Allow Customers to Dictate Payment Terms
Allowing your customers to arrange their terms of payment may spell trouble for your business. That’s because it is only a matter of time before cash flow becomes a huge problem. Setting strict payment terms is a must. Do it even if it means losing potential customers. This is particularly important for cases where items are being issued on credit.
It is also essential to include specific timeframes, the payment terms, and conditions of late penalties. You should also include information on what circumstances can trigger legal action against the customer. This will be a deterrent for lousy business as the right customers will respect your conditions.
Take a look at how long it takes for your business to issue an invoice to the customer. If you’re taking more than a day and more than one resource to do it, you’re losing on resource and time. Don’t forget that you may be waiting for up to 60 days for your payment. So, remember you don’t want to bundle up invoices, issue them to the customers once a week or month, and then wait another two months for the payment. Consider automation of the billing system to reduce the cost of administration. Automation also accelerates the conversion of your business receivables into cash.
Collections can often be overwhelming for small business resources, and can potentially cripple your cash flow. By automating your business’ receivables system, you manage to provide your billing administration with a daily report. The report can include information like the time and the money your customers owe.
Thus helping you foresee potential cash flow issues, help your billing staff focus better on outstanding payments, and work in order of priority. You can consult with your bank about automating the collections system.
Managing Your Cash Out
Outsource Your Payroll
It isn’t unusual for the most significant outlay of a small business to be its payroll. The payroll is commonly one of the most resource-intensive business functions, which needs to happen as per schedule. Businesses are automating payroll services to reduce expenses and increase employee satisfaction.
Several small businesses even adopt the use of payroll cards to provide a secure and convenient method for employees. It helps them manage their money at a low cost. You can download the payroll to Visa cards directly and use it anywhere. It comes with an additional benefit that the cardholder enjoys liability protection as well.
Digitize Your Payables
Another highly taxing function on business resources is the writing, issuing, reconciling, and tracking of paper checks. A great solution to this is access to electronic payment solutions, like an Automated Clearing House (ACH), or an EFT. Banks allow for the streamlining of the payables process. It helps you save time, money, and resources. An additional benefit here is the ability to monitor transactions in real-time. Thus enhancing your ability to manage cash flow.
Analyzing the payment terms of your business’ vendors and suppliers will keep your cash flow healthy. You have to determine a precise and strict payment schedule. It is also not unusual for businesses to choose to make all their bill payments once in a week or a month. However, this can potentially cause short-term cash crunches. Your objective should always be to keep your cash in the business for as long as possible.
In the last couple of years, the relationship between businesses and banks has undergone dramatic changes. There are new technologies and advancements in processes and systems. The software advancements make it affordable and convenient for small businesses to manage their cash. Speak to your bank about remove services and the cash solutions they may have available on their platforms that could help you improve your business’ cash flow.
More in Business & Investments
Organize Your Business Documents Using These Four Tips and Become More Productive!
Socrates, a famous Greek philosopher, famously said, “How many things I have no need of”, or so the legend goes. If...April 28, 2020
At Risk for Heart Disease? Here Are Four Ways You Can Change Your Lifestyle
Heart disease is still the number one cause of death in America. Approximately 200,000 out of 605,000 heart attacks each year are...April 24, 2020
Which is More Important: Money or Fame?
The views people hold about money and fame have always been shifting throughout the course of time and have left many with the...April 23, 2020
Why Is Branding Important for Your Business
When branding a business, it goes beyond the regular logo or graphic content. By thinking about the brand, you also include...April 21, 2020
Bees Are More Than Just Cute Insects: We’d Cease To Exist Without Them!
The collapse of the world’s honeybee population has been a hot topic in environmental science in the current times. However, there...April 20, 2020
Should You Get Your New Business Idea From A Startup Studio?
The concept of a startup is nothing new in today’s world. Several young and talented individuals come up with unique business ideas and aim...April 17, 2020
This Is How You Can Beat Your Sedentary Lifestyle
Advancements in the modern world have made everyone’s lives easier and that’s an undeniable truth. However, aside from all the advantages...April 16, 2020
Six Ways to Wisely Handle Your Finances During a Pandemic
Probably more than health issues, people get anxious about finances during a pandemic. The coronavirus pandemic has an overwhelming impact on...April 15, 2020
Listen Up! Here’s a Great Skill You Can Use to Improve Your Business in Every Aspect
It isn’t unusual for business owners, supervisors, and managers to hear the people around them, without actually listening to them. It...April 14, 2020