Successful entrepreneurs know that it’s critical to employ different strategies to maintain cash flow in their businesses. They know it is the bloodline of the company that ensures sustainability. Cash flow is the difference between a dead or about-to-die business and a thriving one. It is how you can cater for every aspect of the business, rent, employees, suppliers, rates, taxes, and other operational costs.
However, getting this right can be difficult, as three out of five small business owners find managing and maintaining their cash flow challenging. Try these tricks if you belong to that group.
Maintain your cash flow with a business forecast
Having a business projection helps you foresee any futuristic business hiccup. This way, you can make positive decisions that will help increase your cash flow. You can chart this based on the current cost of running your business, such as the cost of raw materials and the proposed total cost of the finished product.
This will help you predict the selling price. You can forecast if you will incur a loss or profit from the product’s sales after subtracting outgoing costs such as salary.
Prioritising the payment system can help maintain the cash flow of your business
While paying bills is essential, you can extend your payments a little and spread them out. The trick is not to pay all your bills at once. Doing so can easily strain your business and affect its operations.
The best way is to prioritise your bills. Since you know the bills you pay every month, you can arrange them according to their importance. You can also ask the people you pay your bills to if there are discounts for early payments. You can use the information also to prioritise your bill payment.
The less important bills are flexible and can be paid later. But don’t let them exceed their deadlines to avoid late charges, which is bad for your business. You can employ software systems that help schedule payments to avoid exceeding deadlines.
Adopt the proper payroll
Use your business revenue stream to choose your payroll system. For instance, a business that makes revenue daily, such as retail and food outlets, can adopt a weekly payroll or hourly payment method.
This, however, should be based on the type of business you run. Weekly payment may not be suitable for a manufacturing or wholesaling business. The best method to ensure regular payment of employees in such establishments is salary. This is based on a monthly plan.
Effective expenditure management
Cash flow is two-sided. It includes money that comes in and out of your business. So to maintain an increase, you need to manage what is going out. That is your expenses.
You, therefore, need to stop unnecessary expenses. You do not use these things, such as monthly business subscriptions that run into thousands of naira and serve as a liability.
To keep tabs on this, you can integrate technologies such as an electronic payment system to track expenses, especially money that goes out of your business. This way, no fees will happen without you knowing, and you will have an idea of your opening and closing financial positions.
Use technology to make and accept payments
Sales will definitely increase cash flow. So integrate every payment system into your business. If buyers do not have or exalt cash, you accept online payments. As you transact, your information is saved in the cloud, where you can easily retrieve it for business decisions.
Ensure you are accountable for the online payment platform as the financial information is essential for your short- and long-term business plan, so monitor the payments system.