Strategies for Managing Cash Flow
Managing cash flow is essential for all businesses. Without proper cash flow management, it can be difficult to keep the doors open. In this blog, we will discuss a few strategies that you can implement into your business to help with managing cash flow.
Invoicing - You should send your invoices quickly to clients once they approve the proposal or once the work is complete. The longer you wait to invoice, the longer you have to wait for the payment to arrive. There could also be some unseen factors that could add longer wait times for you or your client like issues with banks, natural disasters, and checks bouncing.
Payment options - Offering different payment options to your clients will allow you to receive payment much faster. In today’s world, everyone loves to pay online because of the convenience. If you only accept cash or check, you could be waiting longer periods for the payment to arrive which can slow down your cash flow.
Utilize Accounting/Project Management Software - Make sure you are using your current software to its fullest potential. All accounting software and most project management software allow you to track your purchase orders/bills. This will allow you to see what vendors have not been paid yet and when the payment should be made. These software systems will also allow you to track your invoicing a lot easier to ensure you are receiving payments promptly.
Saving - All businesses need a savings account. Businesses especially need to save during good times. These savings can help with unforeseen cash flow issues because it is impossible to predict everything in this fast-paced world. A good recommendation is to have around three months' worth of monthly expenses. Another great recommendation is to save 15% of your monthly gross income for tax-related purposes. This will help with your quarterly estimated tax payments and year-end tax bill.
Review your monthly expenses - We recommend that you review your expenses monthly when you receive your financial reports. If you are having issues with cash flow, review your expenses and try to locate a few items that you can cut back on. For example, let’s say you spent $500 on business meals one month, and decide to cut back to $350 per month. In a year, that would be a savings of $1,800. Removing all operating expenses is unrealistic, but cutting a few here and there will add up quickly and improve your cash flow.
These are a few strategies to help you and your business manage cash flow. If you have any questions about cash flow or would like us to review your strategies, please reach out to your Senior Account Manager.
