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A steady, healthy flow of cash through your business is essential to keep it running at its best and to give you peace of mind that you’re financially secure whatever comes your way.
While a robust, long-term cash flow management strategy is vital for entrepreneurs looking to safeguard their business against financial difficulty, there are a number of guiding principles that should make day-to-day cash flow management a relatively speedy, hands-off process.
In this post, we’re breaking down a handful of quick tips for best-practice cash flow management to help you boost your business’s liquidity in a pinch.
Give customers more ways to pay
The more forms of payment your business accepts, the fewer boundaries there are to making sure you get paid on time and in full. Remember: every obstacle to payment you introduce increases the likelihood of late payments and has the potential to jeopardise your company cash flow.
With some of the many available payment methods including debit and credit cards, bank transfers, direct debits, PayPal, pay later or pay in instalments options and, of course, cash (if applicable), customers across various industries now expect a smorgasbord of payment options as part of the buying experience.
Get invoices out ASAP
Late invoices serve as another unnecessary barrier to payment, so make sure your business isn’t the cause of the delay and instead make sure to prioritise getting all invoices out as soon as physically possible.
Payment terms often stipulate that payment is expected within a certain period following the receipt of an invoice - so each day you delay sending yours pushes this payment window back by another day.
Don’t pay earlier than you need to
On the other side of the coin, taking advantage of payment terms and holding onto cash until you need to make a payment is good practice, as this allows you to retain capital within your business for as long as possible.
The flow of cash in and out of your business is something that should be managed strategically to protect your company in the face of late payments on the part of your clients or customers.
Make online tracking a priority
Having oversight of your business’s incomings and outgoings at your fingertips will empower you to chase up late payments with ease and gain far greater insight into your company’s cash flow.
By using real-time online systems such as a live spreadsheet or data dashboard, you can visualise financial data, including overdue payments, so that these red flags can be identified at a glance, on the go.
Take advantage of customer payment cycles
In the B2B world, a crucial factor in the success of any business is getting to know your clients so you can reap the rewards of this earned knowledge. One primary benefit of this relationship-building activity is gathering insight on patterns in how and when your clients pay so you can take advantage of these valuable insights.
If you find that certain clients pay like clockwork on a certain day of the month, for example, you can leverage this trend to time your invoices in alignment with their payment cycle.
Slash unnecessary costs
Reviewing your company’s operating costs is an essential exercise when it comes to protecting profit. Beyond that, though, periodic cost-cutting also serves to stabilise your business’s cash flow - removing unnecessary outgoings from the equation for better financial health overall.
From surplus energy consumption and overpriced amenities in the office to redundant systems and expensive, infrequently used office space, there are numerous candidates for operational cost-cutting. Analyse your outgoings with a fine-toothed comb to establish where valuable cash is being wasted rather than maximised.
At Harlands Accountants, we serve our clients by shouldering the burden of their business’s accounting while they focus on what they do best - running their business. If you’d love nothing more than to outsource your accounting to the experts, get in touch now. Take your first step towards best-practice cash flow management today.