Effective cash flow management is a daunting task for even the savviest business owners. And it's a hurdle that keeps many promising companies from reaching their full potential. Although staying on top of cash flow can be challenging, it's worth the effort. It can help make your business run more smoothly and keep it in the black, both of which make your life easier.
Here are some tips to simplify your business’s cash flow management.
Accurate, reliable forecasting makes cash flow management a much easier task. Having a good feel for how much cash you'll have in your bank account over the next few months means you can make better decisions in advance. For example, knowing ahead of time when to arrange an overdraft facility or when to reach out to a customer who is behind on payments.
For many busy business owners, finding the time to dedicate to cash flow forecasting can be a challenge. To help manage this process, you can use software that can help make forecasting easy and less time consuming. Armed with up-to-date, reliable forecasting data, you can make the best possible decisions based on the most current information.
Keep a close eye on your outstanding invoices and follow up with customers as soon as any are overdue. It’s easy to understand how fellow business owners could miss a payment here and there. Often, lack of payment is a simple mistake or oversight, and a friendly call or email reminder results in timely payment. Remember, any overdue sales invoices could be cash added to your bank account!
Keeping an up-to-date list of outstanding invoices will help you better understand where you can still collect from your customers and make reaching out to those past-due accounts quick and easy.
Having an overdraft facility with your bank can provide a bit of a buffer for any pinch points during the year. An overdraft is a useful thing, but it is important to keep an eye on how close your bank balance is to your limit, so you don't get caught short. Knowing when you’ll need to utilize the overdraft, how close you are to approaching your limits and when funds will be coming in to bring you back into the black are all important to effectively managing your overdraft.
If your business doesn’t have overdraft protection, staying on top of your bank balance is crucial. Keep an eye on your balance or use a tool that can notify you if you’re getting close to dipping into the negative.