It is possible to succeed in business without managing cash flow – this much cannot be denied. However, anyone that has ever attempted to achieve this task will testify to how taxing and tedious it can prove to be, essentially the equivalent of swimming against the current.

All business require cash flow management of one form or another, especially burgeoning business. Failing to manage your cash flow is the equivalent of signing your business’ death sentence; you might survive the first year, but things will only go downhill from that there.

The concept of managing cash flow revolves around 3 primary elements, namely: the money clients owe you, what you owe to suppliers, and any noticeable shortfalls. Cash flow management requires that you juggle these variables optimally. Here are some tips for managing cash flow effectively:

  • Quickly determine your breakeven point
    This refers to that moment when you can expect your business to become profitable. Although the breakeven point will not directly impact your cash flow, it is a variable that will give you an early goal that you can strive for and will allow you to make future cash flow projections. The idea is to manage your cash flow with the aim of reaching that point when you will start to realize profits. Despite the important step of determining your breakeven point, it is essential that you manage your cash flow not only with profits in mind, but with the idea that it should serve as a benchmark that you can strive for.
  • Maintain cash reserves
    Shortfalls are more or less inevitable; it is for this reason that you should strive to maintain some noteworthy cash reserves. The amount of money you have in the bank at the start of your business will essentially determine how effectively you can maneuver and survive these shortfalls.
  • Encourage and enable customers
    Take steps to encourage your customers to meet their debt obligations as quickly as possible; consider offering early payment discounts to achieve this purpose. And you will need to keep your credit requirements strict, possibly going so far as to maintain written standards that you will use to determine who is eligible for credit.
  • Benefit from technology
    Do your research. The technology offered today helps everything work more effectively and efficiently. And many of these online services are free of use. Consider utilizing cash flow spreadsheets that you can store on a cloud site, allowing you to access them anytime of the day or night. Professional accounting software will also proffer you many benefits.
  • Invest in productivity
    Invest in a cash flow monitor, this being an employee that you trust and whose job it is to inform you when you reach or exceed certain thresholds.

Whether you choose to boost sales with incentives or find ways of extending payables as long as possible, there are numerous approaches you can use to succeed when it comes to managing cash flow; what should be understood from the start is the fact that cash flow management is an indispensable facet of any business.

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