1. Collect as much data as you can
Knowledge is power when it comes to managing cash flow. Today’s technology makes it easier to collect information on your business’s finances, so make sure you harness that ability. Keep track of all your income and expenses, but don’t just look at the big picture. Get into the nitty gritty of what your expenses are – what percentages are going where, which clients or products are generating the most income for you, and what it costs to service those clients, or what the cost of those particular goods sold is. These insights will make it easier for you to manage your cash flow.
2. Dust off the crystal ball?
Although forecasting is never 100 per cent accurate, it can still be worthwhile; you have to have some sort of plan for the future to work with. Using the data you collected, work out what you think your financial situation might look like throughout the year. Most businesses will have an aspect of seasonality, so find out what months are generally quieter or busier in your business. Consider planning for multiple situations such as higher levels of growth, or even a downturn.
3. Get smart
A key problem in cash flow is that some clients simply will not pay on time. This can have huge implications on your business as you spend hours chasing payment, scrounging for cash to pay your own expenses, and stressing about your own unpaid invoices. Instead of putting your business on hold while you wait for invoices to be paid, it may be beneficial to investigate savvy ways of continuing to grow your business. Options such as invoice financing, working capital loans, and accounts receivable finance have evolved rapidly with technology and are strong competitors to the big banks.