Efficient cash flow management is crucial for any business. However, some small business owners get so caught up in other aspects of their company that they neglect cash flow. As a result, they are unable to cover necessary expenses and face ruin. Here are some tips on how you can effectively manage and improve your cash flow when your business has encountered a rough spot.
Forecast Cash Flow
Creating a forecast enables you to see the upcoming status of your company cash flow. This is especially needed when your business is experiencing rapid growth. Along with growth comes the need for more inventory and employees, and if you are not careful, your expenses can exceed your immediate income. Periodic cash flow forecasts allow you to predict patterns in cash flow that allow you to prepare for potential difficulties.
Use your forecast to set weekly goals for your cash flow. You can update these as needed. Having a clear outlook for the near future assists you in maintaining stable cash flow.
Send Invoices Promptly
To facilitate steady cash flow, it is important that you are paid promptly. After you have delivered products or provided services, send out invoices right away. Encourage your clients to pay quickly by offering discounts for prompt payments.
Have Clear Terms of Payment
You are unable to use payments to stabilize your cash flow until you obtain them from your customers. With this in mind, streamline the terms of your receivables collection so that they are clearly understandable to clients. Consider the amount of time you allow for payment of receivables, your company’s collection process, the amount of contact you have with clients during the payment process, and your company’s policy for resolving payment disputes. All of these details should be clearly delineated in your terms.
For more advice on improving cash flow during difficult times, get in touch with Emerald Valley Financial Services.