Businesses run on cash. It’s considered the lifeblood of business, and no company can survive without it. But if that cash isn’t managed properly, things can go downhill fast.
For many managers, cash flow is about money coming in. But what they often don’t realize is that paying attention to the money going out is also a huge part of maintaining finances. As a manager, there are some things you can do to better manage cash flow for your company.
Figure out your budget
If you know your breakeven point, you will be better equipped to manage your money. Rather than focusing all your efforts on your profit, try focusing on properly managing your money.
Make collecting receivables easy
Set up a lockbox so that customers can easily send in payments. You may also consider setting up a direct payment option for repeat or long-term customers. Also, to ensure timely payments, set your invoices to net-30 or net-60 terms.
Offer incentives for early payment
This may sound counterintuitive, but it’s not. Offering an incentive of some sort, such as a slight discount, can really encourage your customers to get their payments in right away. Yes, your profit margin takes a slight hit, but overall you will come out ahead if this thwarts any non-payments.
Extend your payables
On the other hand, when it comes to your payables, try to extend your deadlines as far out as possible. Ask vendors for net-60 or even net-90 terms. Just make sure to pay on time as many vendors will charge a late fee.
Keep credit limits in check
If your business offers credit to customers, make sure to put limits on your credit lines and really evaluate each customer before approval. Check into their history and finances to determine if they can pay you on time. Non-payments will really bring your profits down and ruin your positive cash flow.
Keep good accounting records
Cash flow doesn’t just encompass your profits and losses; they should take into account your payroll and other expenses. Use a good accounting system like Sage 50 Quantum Accounting. It will give you everything you need to stay on top of your cash flow, as well as track orders and add users.
It’s great to bring in a profit, but smart managers know that staying on top of their cash flow is so much more than that. Track receivables and payables and keep good accounting records and you will be on the right course to managing your finances even better.