6 Practical Tips to Avoid Business Cash Flow Problems
Regardless of the type and size of your business, cash flow problems can easily occur unexpectedly. Remember that it’s not only the small business owners that take a hit when it comes to cash flow problems; even established ones are bound to encounter them when there’s no proper cash flow management in place.
The thing is that one of the trickiest parts of a business is its finances. Indeed, it’s one of the most challenging things to take care of. Yet, most of the time, cash flow problems occur in the most ironic period, which is during growth season. Usually, this is when business owners realise they can’t keep up with the rapid increase, which inevitably leads them to hit a wall on their finances.
If you want to stay away from such undesirable situations, here are six practical tips to avoid getting in a cash flow “rut”:
1. Foresee Incoming Cash
It’s not only about keeping track of what comes in and goes out in terms of your business's cash. You also need to predict when and how the money will come in. From there, you’ll be able to plan accordingly and adjust your operations to meet all your business’ demands without getting into a financial crunch. Fortunately, there are plenty of new technologies that make cash management easier for business owners today.
2. Know Best Sources To Meet Financial Needs
Suppose you’re about to face a delay in your cash flow, but you don't want it to halt your operations. The reason you need to be able to predict how and when cash flow will come in is that it allows you to look into the best sources that will help you meet your financial needs as of the moment.
Applying for a loan may take some time, while short-term loans can be expensive. Instead, you can look into your available resources, such as pieces of equipment that you can sell. When you have the right tools to predict incoming cash flow, it will help you better prepare for the future that can prevent fallbacks.
3. Be Familiar With Your Business Cycles
Your business likely has seasonal needs. There could be times in a year when your company needs to hire more employees, or perhaps, need more capital. By being familiar with these cycles, you will be able to effectively prepare your cash flow to avoid getting stuck in a rut!
4. Know Your Inventory
Until your goods are sold, filling your inventory involves a lot of money going out of your business. If you buy your inventory on credit, make sure you have a good sense of your inventory ageing as well as related accounts receivables. This will help make sure that you don't find yourself in a difficult financial situation that ends up hurting your business.
5. Get To Know Your Cash Management Process
Make sure your payables and receivables management processes are streamlined with electronic processing, automated billing and payroll. With these, you can guarantee better inflow and outflows!
6. Get To Know The People You Work With
This process involves your supplies, customers, and vendors. Many times, the problem with cash flow starts with the vendor when they ask for accelerated payments or the client delays payments. This is why you must maintain a good relationship with these people because the partnership you build with them will help you if you encounter a financial rut.
At this point, you now know practical tips on how to avoid getting into cash flow problems. Remember, managing your cash flow requires professional help. For this reason, consider hiring an accountant that can manage your business’ cash flow more effectively to ensure efficient operations!
Are you looking for a reliable business accountant in the Gold Coast? Then you have come to the right place! Our experts at New Wave help businesses minimise tax and maximise profits. Get in touch with us today to see how we can help!