TMCnet Feature Free eNews Subscription
October 16, 2020

How to Improve Your Cash Flow Management



You’ve likely heard by now that cash is king in the business world. Not only is it the most liquid and easily accessible asset that a company can have, but it is also a legal tender that can be used to settle a business’ liabilities. With this in mind, it’s essential to manage your cash flow effectively to reduce your company’s level of debt, lower interest costs, and ultimately ensure your business’ success. If you’re still wondering what effective cash management looks like and how to improve your own cash management practices, read on to learn more.



Manage Receivables and Payables

One way to better your cash flow management is to manage your receivables more closely. By managing your receivables, you speed up the process of turning materials and supplies into products, inventory into receivables, and finally, receivables into cash. You can do this in a number of ways, including offering discounts to customers who pay their bills on-time, requiring credit checks on all new customers who are not paying by cash, issue invoices promptly and follow up if payments are late.

On the other side of this coin is managing your payables. It’s essential to closely monitor your expenses when trying to effectively manage your cash; after all, the less expenses you have, the less cash you’re losing. Some strategies you can use to coordinate your expenses include taking advantage of creditor payment terms, communicating openly with your suppliers so they understand your financial situation, and being strategic when accepting vendors’ offers for discounts on earlier payments.

Automize Your Cash Flow Tracking System

A key component of effectively managing your cash is actively and consistently tracking your cash flow. A critical step in this process is forecasting, which involves the examination of income and cash flow statements, and linking your cash flow forecasts to working capital metrics on the balance sheet. Given how integral forecasting is, it’s vital to make sure you’re getting the most accurate forecasts, which is why automating this process is a good idea. Automation is an excellent alternative to spreadsheets, which can be time-consuming, labor intensive and error prone.

Get a Business Credit Card If Necessary

Getting a business credit card is a great way to provide some cushion for your cash flow when times are tough. Not only will this provide a safety net, but you’ll be able to maintain or improve your credit score as long as you make your payments on time.

Monitor Cash Flow Regularly

The best way to remain effective in managing your cash flow is to consistently and regularly monitor it. In doing this, you’ll remain up to date on the current state of your company’s cash flows and which areas require improvement. From there, you can start brainstorming solutions to any issues that may be outstanding. Online accounting software programs, such as QuickBooks Online, can be extremely helpful in reconciling your accounts, generating reports, and staying on top of your cash flows.

If you want to strengthen your business’ overall financial standing and heighten its chances of success, effective cash management is an essential step. By following these tips, you’ll improve your cash flow management processes and better your chances.



» More TMCnet Feature Articles
Get stories like this delivered straight to your inbox. [Free eNews Subscription]
SHARE THIS ARTICLE

LATEST TMCNET ARTICLES

» More TMCnet Feature Articles