In this blog, we take a look at how to manage cash flow in a small business.
Many new businesses fail because of cash flow issues so it’s imperative that you have measures in place to give you the best chance.
Have a clear, accurate and punctual invoicing process
One thing that can have a massive impact on cash flow for small businesses is late payments. In order to combat this, it’s best to make your invoicing process as rigorous as possible - send the invoice well in advance and make sure you have an up-to-date tracking process.
Source funding from investors
A great way to increase your incoming finances is to look into investment opportunities. Many investors are looking for innovative and exciting new companies to fund and this can help to give you a much-needed financial boost. Seek investment opportunities wherever you can and make sure to highlight your value proposition when you’re making a pitch.
Take advantage of cost-cutting opportunities
In order to effectively manage your cash flow, you need to identify the big outgoings for your small business and see if any of these can be cut. Check for unnecessary expenses (this will be easier if you’ve been tracking your expense), look at low-cost marketing options, and save time and money by using cloud-based software to manage your finances!
Use accounting software
Cloud accounting software is a fantastic way to track and manage your cash flow, which will ultimately help you to improve it. Most good accounting software will provide you with real-time data of your incomings and outgoings, allowing you to clearly understand your cash flow situation and make any necessary adjustments.
Prepare for risks in advance
One thing that can cause serious cash flow issues is if something goes wrong unexpectedly. Although you can’t prepare for every eventuality, it’s a good idea to think to the future and put plans in place for certain risk factors. This could be ensuring a quality financial tracking system, or limiting the amount of high-interest loans your business takes.
Keep back ‘buffer’ funds
It can be tempting to put all the money you have into a business to give it the very best chance of surviving. However, if something does fail, this means you are left with no back-up opportunities. You might still be able to get funding at this point, but it will be a lot harder if you have no money to keep the business going. Therefore, we would always recommend keeping back buffer funds which you can lean on in times of crisis, whether that’s personal funds or an overdraft facility.
As an SME, there’s always more that you can do to be a cash flow management master. Download our E-guide today, for fantastic tips, tricks and secrets that’ll transform the way you view financials.