1. Measure effectively using assets and liabilities
Ever looked at your statement and thought "wow, it looks like we're having a good month" and then BAM! you're hit with last month’s bill from a supplier? One of the ways we can manage cashflow is to use effective measurement techniques, to see what is making money and what isn't. Assets and Liabilities are a great way to do this. Identify what parts of your business are burning through cash, by separating them into assets (property, plant, equipment) and liabilities (loans, legal costs, etc.). Through this, you can even find focus points to hone in on your cash burn, and mitigate any excessive spending areas.
2. Be an accounting detective
It's Friday. You've had a long day. You're tired. You've had a big week. You still have to balance your books, and you detect some unusual spending for this month. You have two options: a) leave it be and deal with it another day, or b) spend your time finding where the unusual spending came from. Most of the time it won't be from a single big spend, but the aggregation of several factors which all need attention. Detective work is hard, but it ensures you are always one step ahead of the cashflow beast.
3. Undertaking a project, ensure costs are estimated beforehand.
Projects in business are very important. Whether they are refitting a shop, to upgrading the company-wide IT infrastructure, the cost estimations of a project almost always cost more than they were planned to. While being accurate in cost estimations is important, it's equally important to give yourself a worst case scenario cost, or how much you are willing to spend before the project gets shut down. Every change we make comes with a cost, and if we know how much we're willing to spend to make it happen we can more easily way up our options.
4. Build checks for customers and suppliers alike
If being late is the new on time, customers and suppliers need to be kept in check for their payments. If customers’ payments are running late, this may disrupt cashflow, and in turn disrupt your business (and not the good kind of disruption). Make sure your customers pay on time, and set a protocol to ensure they do so. By doing so, you make sure you can pay suppliers on time, and keep an accurate account of your cashflow.
5. Survive shortfalls through preparation
We all know the phrase "winter is coming", but we can use this mentality in business to ensure our survival, keeping one step ahead of cashflow. Winter can symbolise a loss of supplier, a drop in customers, or even a change in staffing availability, and in order to manage cashflow effectively during this time our best bet is building a contingency plan. Putting plans in place for the event of a shortfall like building a hiring network, having a backup supplier or even being prepared to drop that morning coffee can be the difference between being in the red and black.