Cash Flow Management Can Save Your Small Business
The responsibilities of running a business are endless. With a heavy load of responsibilities, it's only right to create systems and workflows that will benefit your business, especially when handling your finances.
One of the most integral parts of running a business that helps you measure your business's liquidity and ability to pay debts is your cash flow. With that being said, managing your cash flow can be incredibly tedious since you need to have accurate numbers to know if you're making a profit and that you're not experiencing negative cash flow.
Fortunately, eCommerce businesses have a huge advantage in cash flow management thanks to the immediacy of transactions. However, you should know that just because cash flow management is easier for eCommerce businesses doesn't mean they're exempted from cash flow problems.
That’s why most business owners outsource accountants to ensure that their finances are in check and to ensure that they have proper cash flow management. But what exactly does cash flow management do to your business? Here are some tips that can help you manage your business's cash flow:
Minimize Your Inventory
When you find that you have piles of supplies and inventory sitting on your shelf for long periods, then it simply means that you have too much. With that, dealing with cash tied up doing nothing would be such a waste.
The best way to deal with this is by using stock-keeping units or SKUs to help track every item in your inventory. You get to manage your sell-through rate by minimizing your inventory, which ultimately tells you how much each item is being sold in a month.
When you find that there are low demand items, it's best to consider selling them in bulk and offer discounts so you can take them off your inventory and expenses.
Focus on Improving Your Marketing Techniques
One of the best ways to improve your sales is by creating effective and compelling marketing strategies. But with any campaign and project, planning and brainstorming is incredibly crucial.
A great way to improve your sales is by offering incentives to your customers. Why not provide free shipping to customers who reach a certain amount in their shopping carts? This will encourage them to order in larger quantities.
Another way is by creating customer-centric efforts, such as loyalty programs to help retain customers and push them to continue to buy more of your products. Besides that, subscription services can be beneficial for both parties as well, so consider offering this purchase option, too!
Manage All Your Payables
There's another thing you have to focus on other than your inventory and sales — your accounts payable. Basically, you need to maximize your cash's time sitting in your bank account before you pay your suppliers. When you make contracts with suppliers, ensure that you negotiate your terms.
Payables are typically made within 30 days, but some suppliers are willing to stretch the terms and go as far as 60 to 90 days. Whatever you agree on, it's always best to pay them within the window of the deadline and to watch out for late fees.
This is where your accountant comes in — they can help ensure that you have allocated money for your suppliers and you don't miss a deadline for payments.
The Bottom Line: Having a Solid Cash Flow Management System Will Give You a Clearer View of Where Your Money Is Going
Cash flow management is an important task when it comes to managing your finances. With the help of an accountant, you'll get to create an effective and systematic cash flow process that will allow you to manage your profit, allocate payments, and create financial forecasts that could help develop and sustain your business.
How Can New Wave Accounting Help You?
Managing your cash flow wisely can make a huge difference in your small business. With that being said, it's best to hire reputable small business accountants to ensure that you manage your finances effectively.
New Wave Accounting is unlike any other. We offer end-to-end accounting and bookkeeping services to help scale and grow our clients' businesses. With over years of experience, we managed to help and improve hundreds of clients and their financial systems, helping them flourish in the marketplace.
If you're looking for a small business accountant on the Gold Coast, give us a call today!