Cash Flow Tips for Small Businesses
Tracking and managing cash flow is vital to any business. Without a good cash flow, you can’t pay wages, buy inventory, or invest in the future growth of your business. But when you are running a small business, staying on top of your cash flow seems like an insurmountable task.
Anything from late payments to unforeseen expenses can weigh heavily on a small business, even when sales and profits are strong. Good cash flow management will help ensure your small business runs smoothly and introduce a number of strategies for dealing with short-term cash shortfalls. In this article, we will go over some useful cash flow tips for small businesses to grow and thrive.
Invest in accounting software.
If you want to maintain good cash flow, spreadsheets are simply not enough. Small business owners are encouraged to set up a bookkeeping system using cloud-based accounting software to help monitor cash inflows and outflows more accurately.
Prepare a cash flow forecast for the next 6 – 12 months.
A great number of cash flow tips for small businesses encourage the habit of foresight. A lack of cash can spell disaster for small businesses, but having an accurate forecast can help small business owners anticipate potential cash shortfalls several months in advance and make the right call when it happens.
For example, small businesses can better prepare for cash flow shortages by organising a short-term loan ahead of time to cover the gap. Short term loans offer a fast and affordable solution for small businesses to weather through temporary cash shortfalls. With adequate working capital in order, small business owners can better invest their time in managing other aspects of their rapidly growing businesses.
Review your business’ cash flow statement.
A cash flow statement monitors your business’ cash inflows and outflows. Your cash flow statement can help small business owners gauge their cash flow position in the past. If there was a particular period during the year where cash flow is consistently problematic, small business owners can build that into their forecast and take steps to mitigate any impact it may have on the business ahead of time.
By monitoring and forecasting your business’ cash flow, small business owners will have a better insight into their business’ overall financial health.
Develop a strong invoicing process.
While most businesses in Australia pay on time, even the smallest delay can hurt your cash flow. To make sure that late payments don’t become an ongoing issue with customers, small businesses need to establish a strong invoicing process.
Enabling a consistent invoicing process will ensure bills are paid on time each month. Consider setting up a billing schedule that keep both you and your customer on top of upcoming invoice dates and payments. Don’t wait on invoices – the sooner you send out an invoice, the sooner you will get paid. Always make sure to follow up on sent invoices.
Account for future growth and borrow wisely.
Small loans are not only for businesses that are in financial distress. If your small business is seeing rapid and largely unplanned growth, you run the risk of not having enough working capital to acquire what it needs to expand.
To prevent this from happening, consider taking out a unsecured short-term loan to buy a piece of equipment, vehicle, or software program instead of buying it using the company’s available funds. This way, you can free up some cash that can be used to tide the business over when cash flow is limited. By borrowing wisely, small businesses can:
- Invest in more inventory and equipment during rapid expansion
- Prepare for peak periods where there is high demand and supply
- Open a retail store
- Secure a game-changing market opportunity only available for a short window of time
Access to cash can make or break your small business. Taking the time to track and monitor cash flow can prevent a short-term cash shortfall from jeopardising your business. By following these cash flow tips for small businesses, you too can set your business on the path to success.
Want to make cash flow work for you? Look no further than Direct Finance Loans! Call us today on 1300 800 260 for any questions or fill out our online loan application to get things started.