1. Map it out
Have a list of all your foreseeable expenses and incomes, and map this out on paper. Then, hang this paper on the wall. Include details such as amounts and where that money is coming from or where that money is going to. Being able to graphically or visually map this out will give you a good idea of what to expect in the future and can help you predict future cashflow. What’s more, it can help you predict difficult situations and take measures before the problems occur.
2. Develop efficient stock management
Stocks take up space, and some stock has a tight expiry date. Don’t buy stock you won’t need in the near future (unless there are specific gains to be made, such as ultra-profitable discounts) because it clutters your space and ties up your cash. On the other hand, make sure you have enough stock on hand to transact business efficiently and without delay – or have a supplier where you can get stock at a moment’s notice. Efficient stock management goes hand in hand with efficient cashflow.
3. Be on good terms with lenders
Having a good credit line is essential. Having a good reputation with those who can supply needed cash is crucial. That doesn’t mean you have to take advantage of lenders whenever you can – there’s no need to have debt when it’s not necessary. But there are sure to be times when a little extra cash can avoid a lot of problems, so make sure you know where to go when that time happens. Don’t look to borrow money, but make sure you can when you need to.
4. Set up an efficient administration
Make sure your invoices are made immediately and are organized in such a way that you are reminded of them as soon as payment is due. Stay on top of it. Monitor your customers and make sure they pay on time – nothing hurts business cashflow more than late or non-payments. Similarly, make sure you know exactly when your own expenses are due, and keep track of them.
5. Spread out payments if you can
This is tricky (because it requires professional management from your part) but extremely useful: try to spread out your own payments and pay your creditors as late as possible. This allows you to have more cash on hand in case you need it. Be careful with this – make sure you have the money set aside and don’t tie it up in other ventures. The bills have to be paid, after all. Be wise and disciplined. But a good rule of thumb is as follows: collect as soon as you can, pay as late as possible. Again, a warning: this requires discipline. However, if done correctly, it makes for a healthy cashflow.
Managing your cashflow is not always easy, but taking a few practical steps can ensure a healthy system and prevent a lot of headaches. Because cashflow is so important, it is vital that you or your business manager pay a lot of attention to it. And if you would like nothing more than to avoid cashflow issues altogether, you can always depend on cashflow solution specialists offering factoring, invoice discounting, and even trade, asset, and construction finance services such as Ultimate Finance.
