The positive cash flow of any business makes it survive through crucial times of the business. It is not always the profit which helps to grow the business, the positive cash flow is also equally important. The negative flow, i.e. those that pay more money out than they bring in, face a lot of difficulty in making the business run and in some worst scenarios, they may need to close the business.
It takes business owners years to manage the right cash flow. If you own a small business, the lack of cash flow can be scarier. Here we have bought a few tips to manage your small business cash flow wisely
10 Tips to Manage Business Cash Flow Like a Pro
1.Keep an Eye on Cash Flow
Any kind of business is run to earn a profit. But there are times when you should keep the profit as secondary and take cash flow as the primary consideration. If you foresee that your business cash flow is going to hamper in upcoming days, you are to shift your focus from profit to cash flow. In this way, keeping a sharp eye on cash flow can save you from the disaster one may face from negative cash flow.
2.Keep Cash Reserve
The cash reserve can be termed as ‘business emergency fund’. The business emergency fund. The shortage of fund is a common situation that hits a business now or then. If you are equipped with cash reserves for those lean times, you will be able to save your business from the blow, stress and distraction that may hinder the growth of the business.
3.Avail a Business Line of Credit
Apply for a business line of credit before you face the negative cash flow. A business line of credit cushions the troubles you may face during the insufficient cash flow. Keeping a business line of credit handy works as a safeguard against the hard times of your business.
4.Collect Receivables at the Earliest
If you find that the delay of your receivables may make you face negative cash flow, you are to speed up the collection of receivables. Most of the times, if the gap between the receivables is payables are long, it creates negative cash flow. So being a small business owner make sure that you minimize the gap by collecting the receivables sooner.
5.Extend the Payables
As you can speed up the receivables, you can extend the payable to manage the cash flow. But at the same time, while you are extending the payables, make sure that the reputation of the business is unharmed. So while following this step, you have to be very careful. Implement this plan to your business only if it is possible.
Boosting in sales can also help you to fight with the negative cash flow. You can implement different strategies like marketing, incentives to sales executives, sponsoring contests, giving offers on the products and so on.
7.Take Help of Collection Agencies for Old Account Receivables
If any of the old payment is stuck and you alone is not enough to collect the receivables, you can take help of a collection agent. If the receivable amount is really high and the receiving of the same amount can make your cash flow normal, you can hire collection agents to speed up the collection of receivables.
8.Finance Big Purchases
Using cash for big purchases can be an obstacle to the business cash flow. Instead, one can finance the purchase. Though financing of the purchase attracts interest payments, it helps you to manage the cash flow of the business. Making big purchases may make you face the scarcity of liquid fund in your business.
9.Spend Only on Essentials
The adequate cash flow demands that the business should cut down unnecessary expenses. Outside the most essential expenses, the business should eliminate the expenditure in less important expenses so that some money can be kept within the business.
The hiring must be done in such a way where you can get the maximum benefit. The right hiring and an efficient management team will make your business grow with fewer expenses.
To Sum it up
If you own a small business, there are a lot of challenges you are to face including the business cash flow. Managing the cash flow sometimes become more important than the profit you earn from the business. So keep a sharp eye on the cash flow so that your business runs without a halt.