5 Steps to Managing Cashflow in your Small Business
Updated: Nov 11, 2020
Managing a healthy cash flow is crucial to maintaining a successful business. It's something we see time and time again as accountants. Small businesses who stay on top of their cash flow are more in control of their business helping them stay in the black. Here are our top 5 tips to managing cash flow in your small business.
1. Monitor Cash Regularly
Using online accounting software such as Xero can make this process so quick and easy for you. They make it simple to reconcile accounts, generate reports and keep an eye on what you're spending money on. Cloud software allows you to do this anywhere, whether it's in the back of the taxi or between meetings.
2. Keep Control of Spending
This can feel difficult when starting up but it's important to maintain control as costs can quickly spiral. It's important to hold onto your cash reserves and avoid adding further costs to your business. Your new business needs cash to survive so your main focus should be protecting and nurturing your cash reserves.
The easiest way of managing spending is by creating a detailed budget and clear targets.
3. Reduce Costs
When monitoring your cash, look for any annual or monthly expenses that you no longer need. Perhaps you could cut back on subscriptions or services you are no longer requiring? There may be room for negotiation with long term payments too.
4. Sell Unused Assets
That old piece of equipment gathering dust in the corner could be cashed in to generate quick cash.
Instead of buying a new piece of equipment, consider leasing it. This allows you to access the best products out there without having to tie your cash up into it.
5. Stay on Top of Invoicing
This might sound basic but it's crucial to maintaining healthy cash flow. Make it as easy as possible for your customers and clients to pay their invoice. Here are some tips:
Make the layout of your invoice straightforward to read and easy to digest.
Hand out your invoice immediately after the work has been completed.
Make payment terms crystal clear.
Hand over the invoice to the specific person who handles payments so time and money isn't lost in a shuffle around departments.
Use Accounting software to manage and send invoices out.
For further guidance specific to your own circumstances, we recommend meeting with an accountant. For more information and advice, get in touch with Catherine today. Give her a call on 01423 431889 or email email@example.com.