Businesses of all types and sizes are kept alive by the constant ebbs and flows of the lifeblood of the economic world—money. Whether you run a tech company, a house cleaning service, or a restaurant, properly managing the comings and goings of your cash is mandatory for ensuring the health of your organization. Regardless of the type of business you run, there are some universal tenants of cash flow management that can help guide you down the path to financial success.
1. Plan Ahead
This may seem a bit trite and obvious, but planning ahead isn’t something to take lightly. With every business, many factors can be anticipated. This is especially true after you’ve carved a comfortable groove in your operations over a period of time. Keeping track of trends will allow you to comfortably predict how things will go in the near future.
Businesses should also make room for the unexpected. Just because things went one way the same time last year, doesn’t mean there won’t be turns of events that demands an immediate response. Plan ahead to avoid wasting time getting too granular for things well off into the future. Financial hiccups can easily offset predictions and force you to spend time reassessing previous plans.
Gathering the data you need to make solid predictions and preparations requires detailed record keeping and keen attention to detail. You should be keeping solid reports on operations and not just making mental notes. You’ll want to sit down and go over everything in detail later. Having to scramble for cash in a time of desperation can lead to poor decisions and a lot of headaches.
2. Intelligently Cut Costs
Cutting costs is a term with a lot of loaded baggage. Going around with a ruler and finding each and every inch of the business you could live without isn’t ideal for most operations or for employee morale. Searching for alternatives that are more efficient or equally as capable but cost less is the best way to cut costs without walking around the office looking like a headsman. You should also be on the lookout for new technology that can make life easier for you and your employees.
Consider renting or buying used equipment instead of defaulting to new devices and machinery. Repairing existing equipment tends to be much cheaper than replacing it altogether, but that’s not always the case. Proper financial analysis can help you see which decisions will serve you best in the long run. However, make sure you don’t get too distracted by the big picture to see the small details in front of you. Making decisions for five years down the road when your business could get into some hot water in the next few weeks could lead to disaster.
3. Make Your Money Work for You
Having money sitting around in an account doing nothing is both good and bad. All businesses need some amount of liquid assets on hand to cover expenses. However, having too much cash on hand is also a lost opportunity as you could be reinvesting and getting your money to work for you. Finding the right balance is imperative to maximizing your cash flow efficiency.
Finding interest-earning accounts that have a high yield but don’t lock down your funds will go a long way in increasing the potential of your liquid resources. Juggling cash between higher-yielding savings accounts and checking accounts can be worth the effort especially if you need larger amounts of cash on hand for regular outflows.
4. Get Paid Faster
Receiving payments as quickly as possible makes managing your cash flow much easier and more efficient. It’s imperative to train your customers to make timely payments. Payment on delivery is ideal but is not always possible. Create standardized invoicing procedures and follow up early and often on customers who are slow on the draw.
Consider using services like SeamlessChex that provide ways to receive digital checks online. Receive fast electronic funds transfers, cut out the long waits for mailed payments, and reduce the ever-present possibility of bounced checks. You can use these services to instantly accept eChecks and get money flowing into your accounts faster than with traditional methods.
Balancing the ins and outs of cash flow is a difficult but rewarding task that will help you ensure the financial health of your organization, allowing you to maximize your profits and stay ahead of the competition.