Managing cash flow is crucial to business success. It’s about balancing your cash flow so your business operations don’t get hampered. When you know about the cash coming in and going out within a period, you can make rational estimates. If you find yourself confused in the middle, you can always refer to your credit information report to help you.
Small businesses often struggle to meet their financial needs. It could be due to the lack of planning or unexpected expenses. It may also be overspending on things you don’t need. Whatever it is, managing your cash flow is important.
Let’s discuss how you can do it efficiently.
Go through your bank statements
If you are foreseeing risks in the coming days, make sure to go through your bank statements. Take the help of your accountant to know if you’re making unwanted purchases. Take into account the last 3-6 months period. See if it was smooth for the business or you had to bear a cash crunch phase. It’s the best way to manage your cash flow cycle.
Cut down on unnecessary expenses
It is in addition to the previous point. You can always enjoy a positive cash flow cycle by keeping your expenses under control. Cutting costs is a viable thing to do in this context. It could be spending unnecessarily on a low-paying client or overspending on marketing promotions. You have to cut on costs to manage cash flow. You can keep that money for emergencies. If you don’t do so, your commercial CIBIL score may get impacted.
Send invoices timely
Managing cash flow is knowing about the money coming in and going out. So, if you have got orders in the pipeline or working on a few projects, you should send timely invoices to your clients. It can help them expedite the payment process at their end. Also, you should do it to avoid payment disputes, which can impact the payment cycle. If your payment gets delayed, it may not be good for your business operations. Besides, your business credit score may suffer.
Vouch for early payments
If you can manage to get half of the work done before time, you can request early payments from your clients. You can assess your cash flow cycle and check if you need funds in the near future. How do you get those funds? By being proactive and rooting for early payment options. It’s applicable to a new partnership as you can ask for a specific advance amount. With that said, do not misuse your funds otherwise you may have to go through the tiring payment settlement process.
Handle large contracts well
If we talk about long-term contracts or large payments, you should deal with that carefully. Either you can request the full amount in advance or make a deal to receive payment on a monthly or quarterly basis. This way, you will have the cash to run your business operations. Be patient enough to let things materialize before agreeing on payment terms.