Cash Flow Management Doesn’t Have To Be Hard Read These 5 Tips
The foundation of any successful business lies in the management of a healthy and systematic cash flow.
Sometimes, owners of small business setups confuse and trouble themselves while handling cash flow. Every business owner needs to understand the fact that business cash and personal finance are two different entities. They need to be handled separately and carefully. If not handles well, it is a disaster. The key to the success of your business is the efficient cash flow management. My friend, a financial wizard who had worked at HughesNet Internet shared some key points about the importance of maintaining cash flow.
If you own a business I’m sure you will find these useful.
5 Effective Tips to Improve your Cash Flow Management
Stay ahead of your cash flow game with these five simple tips:
- Don’t Count the Chickens Until They Hatch
- Have a Deposit
- Know Who Has to Be Paid
- Make Sure Not to Use Tax Money
- Give Incentives on Getting Paid
Let’s elaborate on them.
Don’t Count the Chickens until They Hatch
We all know how we trust a client when it comes to payments pertaining to their payment history with us. While it’s a plausible thing to do, know that there are no guarantees in business. What you need to do as a mandatory process is sending a checkout. It is a wrong approach to get the payment just before the vendor wants to cash it. If you do that, you are risking and alienating valuable vendors. Also, the fees and charges accumulating are making your cash flow problems even worse when your payments don’t come in time. You can’t just cross your fingers and rely on an unknown future and hopes. You need to know your financial needs beforehand. Be it a line of credit or a bank loan. For small business requirements, you need to own a credit card. Make sure you handle the credit card problems well too.
Have a Deposit
For large and time-consuming projects, even if they are with trusted clients, don’t be reluctant to get a deposit prior to starting the project. This will give you a cushion to be able to survive the extended project time. It’s not wise to get paid after 6 months when the project is completed. You have your expenses to take care of in the meanwhile. Always make sure you get a deposit in advance, especially if it’s the only dedicated project. This way you will keep yourself and your employees happy.
Know Who Has to Be Paid
Do you know that many owners of small business setups are excellent managers when it comes to their personal finances? Which is why they thought they are good enough to take a business risk. However, studies show that people are not as efficient, consistent, and precise in business finances like they used to be with their own. Let us help you here. Business finances don’t have many similarities with the personal ones. Yes, you used to pay your personal bill right on the day it arrives, but you don’t need to do the same for your business. If you have a 30-day cushion, you need to first pay attention to who needs to get paid first. You don’t want to lose your efficient employees due to late payments.
Make Sure Not to Use Tax Money
Treat the money set aside for taxes like it doesn’t exist. Whether your business setup is big or small, you really shouldn’t borrow money from the tax stash. It’s almost impossible to pay it back in time. So, don’t even try it in the first place. You need to learn effective and trouble-free cash flow. You need to resist this awful temptation at any cost. When we say don’t even go there, we mean it!
Give Incentives on Getting Paid
If you are an owner of a small business setup, you already know the feeling. When the time of payment comes, it seems like everyone else is also suffering from cash flow problems. While you are stuck in your problems, you have to show understanding of their concerns. Here is a way to deal with it. Incentivizing getting paid is a good idea. Offer your clients discounts on making an early payment. For instance, Hughes Satellite was offering a limited time discount for early bill payment exclusively for workplaces. Even if it is 10%, your customers will definitely be tempted to do so. After all, who doesn’t want to save up when they are already embroiled in financial problems.