Imagine after finishing lunch with a client, you turn around and say, “Don’t worry, I’ll put this on the business.”
The waiter takes your card, swipes it, and reports back, “I’m sorry, the payment didn’t go through.” You look at the client, unable to utter a word due to shock, and they say, “That’s ok. I’ll get this one.”
You know you’re not getting that client back, right? They’re heading straight off to your competitors after that. You see, knowing how to manage cash flow in your business is absolutely critical to your future success.
You need to have an understanding of what’s coming in and out of your business at all times, so you can continue growing and not get caught short-changed at a business lunch.
If you feel you’ve not focused enough on managing cash flow, don’t worry, we’ve got your back. We’re here to present 5 ways to manage cash flow in your business, so you can focus on scaling your company.
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1. Don’t Be Afraid to Negotiate Payment Terms with Vendors
If your company has a good credit rating, you should ask vendors for more flexible terms. For example, if they currently offer 60-day discounts, and you need to pay them in 30 days, they might agree to the new discount.
Actions like this will help you stay afloat.
2. Utilize Your Credit Cards Wisely
Using your credit card wisely is a good way to manage money. You can use it in case you don’t have enough cash. But you must pay off the balance before the interest charged start adding up, or else you will be able to do it.
You can even look at getting a company loan. But make sure you factor in receivables.
3. Don’t Overstock Inventory
It’s important to have enough inventory in your business. Sometimes when a company runs out of stock, people think the company is not doing well. However, sometimes they just need more inventory and can get it soon.
When it comes to managing cash flow, keep in mind that the money you spend purchasing extra inventory could better serve your business as working capital or extra time before needing to pay off a credit card.
4. Avoid Making Large Purchases without Prior Approval from Management
Many businesses manage their cash flow by avoiding making any major purchases until they get approval. They can do this by suggesting a cheaper option or waiting until the next fiscal quarter to buy it.
Some companies also have these “purchase protocols” where employees need to say, “Hey, I want to buy this!” Before they actually go ahead and buy it.
5. Keep an Eye on Cash Flow Trends
One of the most effective ways to manage your company’s cash flow is by looking for trends throughout the month. For example, if you notice that sales are up on Mondays but slow on Tuesdays, you need to be able to react to that.
Maybe Thursday or Friday would be better days to send out invoices because customers may need more time to pay.
You can use your invoice system as a tool for monitoring cash flow, by setting up notifications when customers have not paid their invoices after a certain number of days.
Want More Information to Help You Manage Cash Flow Better?
We hope our list of 5 ways to manage cash flow for your business has given you some financial advice about how to tackle this issue. If you’d like more helpful articles like this, please visit our blog!