Managing your business finances is never as easy as you think, and even in your personal life, you may find it hard at times to stay on track. When in a financial crisis, you may look at payday loan lenders to help get you through the tricky situation. But you also want to try and manage your finances once you’re out the other side so that you keep yourself afloat better. The same can be said for your business finance, except you’ll need to manage your cash flow. If you want the best cash flow management tips, keep reading and discover more below…
Related Post: 7 Ways For Improve Cash Flow Management For Business
What Is Cash Flow?
Cash flow is the money that comes into your business via sales and finance and then is spent on expenses necessary for your business. Your cash flow is therefore determined by how many sales you make and how much money you have coming into your business. However, more sales can mean higher expenses so it might not automatically mean you have a higher cash flow. This is why it’s crucial to manage your cash flow so that it remains in the positive, not the negative.
Expect The Unexpected
When it comes to running a business, you need to be prepared for anything. So many companies struggled when the pandemic first hit because there were no procedures in place for such a situation. This led to them scrambling for a solution amongst government guidance and caused a lot of disruption. This is why you should always expect the unexpected and plan for every possibility. As your cash flow is directly impacted by your sales, part of managing it is also managing your sales. If your sales are suddenly down, then you need to be aware that it will directly affect your cash flow and be ready with a solution.
Review And Update Forecasts
It’s crucial for any business to have a forecast but you should also incorporate a weekly cash forecast into it as well. This way you’ll be able to see just how much cash flow you’re predicting to have and then you can update it throughout the week as you go along. This gives you a clear view of exactly where your cash flow is at that point in time. You should regularly review and update them in order to stay on track as each week will be different from the last. Things like public holidays can affect your sales, therefore increasing or decreasing your cash flow. You want to make sure that your forecast reflects any changes as it can help you to accurately predict future months and years, allowing you to understand how your cash flow changes throughout the year.
Reduce Your Outgoings Where Possible
Although some expenses are necessary, there are probably some areas where you could cut back. You want to try and reduce your variable costs to reduce the number of payments going out. This will help you in the long run and enable you to keep your head above the water. For example, you have to pay labour costs, but reducing them where you can, cuts down your expenses and prevents you from having to reduce the number of staff employed further down the line. Decreasing your outgoings will help your cash flow to remain steady and able to withstand a quieter period.
Don’t Be Afraid Of Borrowing
Although you may be getting by fine on your own, don’t be afraid to reach out for financial support if you need it. Use your cash flow forecast to see if there are any times when you may desperately need it and anticipate it beforehand. There are so many different types of finance available to businesses nowadays, so you aren’t only going to have to rely on a loan. You could even utilise a credit card for daily spending and then pay it off at the end of the month. Whatever method you choose, make sure that it’s in your moment of need that you’ve determined by using your cash flow forecast.
Expenses VS Budget
Your budget and expenses may look similar in terms of numbers, but really,they can both fluctuate. Your expenses will impact your budget and vice versa. The more outgoings you have, the less cash flow you’ll have. This is why it’s important that you keep your expenses and budget separate as although they may correlate, they aren’t exactly the same. As your budget increases, your expenses may too. Or you may be able to increase your budget if you cut down on your expenses. Keeping on top of both of these will definitely help you manage your cash flow better.
Drive Multiple Channels Of Sales
As your cash flow is driven by sales, you should try and have multiple avenues that will generate sales for your business. That way, if one of them doesn’t do as well one month, your cash flow won’t be as impacted because it has the other channels to fall back on. It will also help you when forecasting as you’ll be able to see success in more than just one area. It can also help you predict your cash flow better too as you aren’t overestimating because you’re relying on one type of sale. Having a diversified business will help you become steady and keep your cash flow continuous.
Cash flow is the vital organ of any business, and it should impact every decision that you make. If it gets too low, then you won’t be able to operate, so it really needs to be managed well. These tips above can really help you get a handle on your cash flow for the better and encourage it to grow as well. In no time at all you’ll be back on track with your cash flow and your business will be doing better than ever!