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5 Effective Ways to Manage Your Cash Flow

Improving your business’ cash flow

Cash flow is one of the most important aspects to the ongoing success of a business, yet it’s one of the hardest things to manage. You can secure healthy contracts that look great on paper, but if there is a delay in it coming in, it can have serious consequences. Here’s how you can improve your cash flow to stop your business from going under.

  1. Have a cash flow forecast

Before you take any action you need to have a reliable forecast that highlights areas of weakness in terms of your cash flow. Having an awareness of your cash flow issues means you can take more of a pragmatic approach to patching any holes and tightening everything up. Get in the habit of regularly forecasting cash flow across the financial year and refer to it regularly.

  1. Cut costs

As obvious as it sounds, if you’re haemorrhaging money, you’re going to be putting an unhealthy strain on your cash flow. One of the easiest ways to address cash flow difficulties is to highlight areas where you can make a saving. This could include staff perks, entertainment, office supplies and other non-essential costs.

Cutting overheads might not score you any points initially, but if it’s for the protection of your business and its staff, it should be seen as a necessary action to benefit all.

  1. Reduce stock

If you buy stock ahead to resell, consider ordering less to reduce initial outlay. This may mean some delays to delivery when sending out your product, if sales boom and you have less stock, but it can often be managed with the right communication. Alternatively if you have a large amount of stock lying around, look at offering discounts to make some quick revenue.

  1. Adjust payment terms

If you really are suffering cash flow issues that are risking the future of your business, you could shorten the customer’s credit period to call in cash quicker. You could also look at stretching out the payment terms to suppliers, to buy yourself more time. Both run the risk of damaging relationships and need to be carefully considered, however they do form the basis of an emergency strategy and are often used by businesses who find themselves in financial difficulty due to cash flow problems.

  1. Hold fire on developments

Obviously it goes without saying but if the immediate plans for your brand were to expand by moving to bigger offices, employ more staff etc. halt the plans until your financial position improves. Avoid big outlays that could put more of a strain on cash flow. Reversing developments can be equally costly and a waste of time.

Cash flow remains one of the biggest challenges for businesses and can be really detrimental to start-ups and SMBs. They key to surviving cash flow problems is in forecasting and proactively planning.