Running a business brings numerous challenges, especially when you grow from sole trader to employer. Cashflow is one of the biggest challenges amongst all. Many findings suggested that many businesses solely depend on manual processes to manage cashflow. As a business owner you need to understand that cashflow management is not just about understanding profit margins, but knowing the in and out of every business process can help you determine the costs in an effective way. Besides these, relying on accounts payable software can help you evaluate your options and find the suitable method.
Here are a few tips that help your business stay on the track:
Forecast Always Helps
Business owners have to understand how much cash your business needs to run day-to-day operations. Expenses such as rents, bills and resource costs have to be compared to the profits that business gets. Once you know the budget, you can measure results and forecast the future spending. Set cashflow targets on a regular basis to get a more accurate view for the coming years. This way you can organize your cash flow in an efficient manner.
Set Payment Terms
To manage your cashflow effectively, you should know your overdue payments. Knowing your payment terms and conditions can help you plan and negotiate better for the longest terms for accounts payable. Automating the process with accounts payable software can help streamline the end-to-end processes and ease the burden of finance department. Also, it is better for you to minimize the gap between invoice and payments.
Set business bank account first. It is better to maintain your business and personal finances separately. Make sure you have proper methods in place so that customers can pay you through a number of secure options, including but not limited to online payments, bank transfers and credit cards.
Offering best payment options to clients can help keep your cashflow run efficiently. This works well for service-based businesses. Offering up-front paid retainer each month can benefit your business. Retainers offer discounts and therefore getting paid upfront rather than in arrears can help better forecast the cashflow. This would give you peace of mind and relief from financial tension.
Keeping an eye on daily credits and debits will not only ensure there are sufficient funds but can also help in managing the cashflow effectively. Having regular substantial outgoings and unpredictable income stream can keep you on top of things.
Keep Finding New Business Opportunities
If your business runs good this month, doesn’t mean it will be the same next month too. No matter whether it is a SME and MNC, every business owner must consistently build a pipeline of new business and create more opportunities for continuous growth.
Cashflow is the stress factor for many business owners. By following the above tips, you can cut down the stress associated with business processes and set your business for continued success.
This post is part of our contributor series. It is written and published independently of TNW.
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