The concept and idea behind managing your cash flow are quite straightforward, but it’s easier in theory – and every business owner knows this. Managing the cash flow of your business is not something to take lightly because it can lead to disastrous consequences if you don’t have enough cash flowing into your enterprise. The good news is, you can take advantage of various solutions to properly manage your business’ cash flow, including outsourcing some major tasks to an accountancy firm or making use of good accounting or bookkeeping software, so you know your business’ financial workings and dealings. But how else can you best manage your business’s cash flow in 2021? Here’s your essential guide.
- Establish a good system of credit
First of all, you would do well to establish a sound system of credit for your business. It doesn’t have to be all that complicated, either – one core step is to set clear limits on credit for your clients, and another thing you can do is set clear payment terms. Additionally, prioritise your invoices. Send them out promptly, and chase debts and payments once these are due.
- Make use of forecasting
Forecasting your sales is about making predictions so you can prepare for any troughs and peaks in your cash flow. Once you already have your sales for a month, for example, you can already make a forecast for your sales. When using forecasting, think about your business’ pricing and the pricing of your competitors. Don’t forget the state of the country’s economy so you can determine the demand for your products or services as well. Also, keep this in mind: you should be cautious rather than too optimistic. This way, you can avoid any unpleasant surprises and be well-prepared for any eventuality.
- Reduce unnecessary spending and expenses
Another surefire way to effectively manage your business’ cash flow is to reduce unnecessary spending and expenses. So the big question is, how will you do this? According to expert GSM Accountants in central London, one answer is to ponder over every single item you buy. You should also know precisely where your money is going. It follows that you have to ensure you are getting the best value for your money with every purchase or investment you make.
It’s worth noting that some of your expenses may be deductible on your tax returns, so familiarise yourself with these tax-deductible purchases and expenses and find out how you can include them come tax time.
- Try to negotiate a reasonable term of payment with your suppliers
You can also try to figure out how to negotiate a good term of payment with your suppliers. Think about it: this is lucrative for you because if you can settle your invoices in 60 days or even 90 days rather than 30 days, you can keep your business’ cash for an extended period – and this can help you regulate and manage your cash flow.
If you plan to make a bulk order for some items or supplies, it’s a good idea to negotiate. You can also try setting up scheduled payments instead of paying off your bills or invoices in one big lump. Good luck!