Tips on How to Better Manage Your Cash Flow
Updated: Dec 12, 2019
Maintaining your cash flow is an essential function in business, whether you're preparing financial statements on your own for tax season, a budding business owner looking to get a head start on your operations, or for the simple reason of budgeting your company's assets.
The goal is to keep track of your financial records and transactions, which you need to maintain to achieve a financially sound process. With that in mind, entrepreneurs are required to store accurate data in ledgers, journals, financial statements, income tax records, and more. Those who choose to crunch the numbers on their own, however, must adopt proper bookkeeping and accounting habits to keep track of the cash flow.
Such habits will reduce risks and keep your business running as smoothly as possible. Here are different ways that can help you better manage your cash flow and prompt your business to flourish:
Tip #1: Establish a Bookkeeping Schedule
When dealing with your company's finances, be sure to set aside some time in your schedule for managing your cash flow on a weekly to monthly basis. This is because adopting this habit will help you stay on track of your receipts and transactions before they pile up, which will reduce the risk of inaccurate data recording. This will also help you stay up to date on the financial status of your business and enable you to make informed financial decisions.
Tip #2: Tighten Up Net Terms on Invoices and Late Fees
Customers falling behind on payments is an inevitable occurrence, and while it is unavoidable, you can reduce this by continually communicating with your customers. This involves managing your accounts receivable and sending electronic invoices, followed by a standard cadence to notify them for an update after 10 to 20-day requests on their status. With that in mind, keeping customers engaged with your transactions will help ease any financial bottlenecks in the long run.
Tip #3: Separate Business and Personal Accounts
This is an obvious tip; however, many entrepreneurs still do business transactions using their accounts. This can be messy and lead to confusion when left unchecked, so the best thing to do is to make a clear distinction between your social security number and sole proprietorship. This will reduce the risk of convoluting your operation's revenue, expenses, and performance.
Tip #4: Utilize the Right Accounting Software
No business should go without accounting software, as it reduces the chances of human errors in your financial records. After all, the heart of your business depends on a reliable bookkeeping system, which is what accounting software aims to give you. It will help you streamline the bookkeeping process with optimal results in a fast, efficient, and effective manner. This includes recording, managing, tracking, and assessing your sole proprietorship's expenses down to the last penny.
Tip #5: Keep All Receipts, Invoices, and Track Your Receivables
Keeping receipts and invoices is a given when it comes to bookkeeping and accounting, though tracking cash expenses may be harder to have on record. In cases like these, it's a good idea to keep a notepad on hand to write down these expenses, enabling you to have a full overview of your cash flow.
If you’re looking for an accountant or bookkeeper on the gold coast, get in touch with us today for a free consultation.