• New Wave Accountants

How to Wisely Manage Your Small Business’ Cash Flow

If you are a small business owner and a beginner in the field, you probably have not fully grasped how vital cash flow management is to your business's success. If you want to understand it better and get tips on controlling your cash flow, here are the things you need to know.


What Is Cash Flow and Why Is It Important?


Simply put, cash flow is the blood that runs in your business. It will determine whether you can get the things you need to run your business smoothly or, conversely, if you will be left with a shortage of money required to pay your employees, your suppliers, your bill payments, and everything else.


Because every company is different and has a different way of running, there is no perfect formula that can be applied to all kinds of businesses or companies. The principles, however, remain the same.


Here are five rules to help you control your cash flow.


1. Send an Invoice Right Away


As soon as you have fulfilled your end of the bargain and delivered the goods or services that you were paid to do, you need to send an invoice. The longer you wait to send it, the more likely you will forget to do it, thus leaving you without the cash you are entitled to.


2. Be Fair and Don't Be a Pushover


While you are entitled to your money, you must be mindful of the people you are dealing with. That means you should know the normal payment period and how often you should be getting paid.


Suppose someone is paying you late, whether by a few days or weeks, politely speak to them about it. Explain to them why it is a problem and why you have a right to get paid on time.


That way, you can have a working relationship in which both parties do business knowing that late payments are not allowed.


3. Apply a Payment Plan to Your Debtors


Sometimes you need to set up a payment plan to get your clients to pay you faster than they would normally. To do this, you can offer to charge them a small interest rate—say, 1%—to ensure they can pay you before the deadline. While this may not be an option for all kinds of businesses, there are some instances wherein it would work well.


4. Separate Your Business and Personal Money


To prevent your business from being put in danger by your personal money issues, you must keep the accounts separate. That means you should not use the money from your business to pay for your personal expenses, even if you don't have any cash on you.


5. Pay Yourself


One important rule for cash flow control is to set aside a portion of your income for yourself, no matter how small it may be. That is important because you are the one who will be working hard to make the business run—you need to make sure that you are taken care of as well.


6. Keep Your Accounting Simple


If you are a beginner at running a business, you may not have the time or skills necessary to keep track of every transaction in your company. With this in mind, you might want to consider outsourcing your accounting requirements to a professional who can handle them for you.


Conclusion


Having financial control is the most important thing for any business. If you don't have control over your cash flow, it will be impossible for you to grow your business.


The key to controlling your cash flow is to be proactive, focused, and ready to make changes as needed. If you want to create a business and make money online, you will need to learn the business's basics.


Work with an experienced accountant on the Gold Coast who can help you build and grow your business. New Wave Accounting understands small businesses and provides them with end-to-end accounting and bookkeeping services. Contact us to know more.





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