Angela Kamanzi My Journey in Entrepreneurship
Good cash flow management is important to ensure there’s enough cash on hand to cover expenses, benefit from opportunities and grow your enterprise. Here are a few tips on how to improve your cash flow and assure that your business venture has what it needs to achieve its goals.
- You need a positive cash flow. We talk of positive cash flow when there’s more money coming in your business than being used to pay the bills. There’s negative cash flow when your business spends more money than it makes. In case your cash flow is negative, take steps to repair it. Start an evaluation of how you manage your accounts payable and receivable, your inventory as well as your credit terms.
- Correct your negative cash flow. Identify any patterns that cause negative cash flow. Do you buy more inventory than you can sell? Do you extend credit to customers who pay late? It’s recommended to monitor your sales and expenses on a daily basis. If daily is a challenge, monitor your business current account, accounts receivable and accounts payable at the very least every week.
- Be aware of your receivables due date. Create an accounts receivable aging report to identify your customer’s payment habits. This information helps you follow up with late-paying customers so that you can get paid faster. To encourage payments on time, send invoices as soon as work is completed; invoice by mobile phone, online or email and accept a wide range of payment options.
- Have sales projections. Monitor your daily sales in order to set inventory needs projections. This will help you have just enough on hand to meet demand and avoid overstocking excess inventory and incur costs in storage and maintenance. Have quarterly sales projections based on past history and future estimates to plan and budget for inventory purchases.
- Don’t extend credit easily. Extending credit to customers, especially the slow paying ones can lead to cash flow problems. Tighten your credit terms and negotiate new ones with existing customers who have been delaying payment. Always check credit reports before extending credit. You may ask for deposits or partial payment in advance if it’s appropriate, so you have the cash on hand for your purchases.
- Conserve cash. Stay on top of when your payables are due. Pay on time, not early if keeping enough cash on hand is more important. If your cash flow is positive, see if you can get a discount for paying early. These will help you keep more cash in your accounts and cut costs.
- Work with your vendors. Are all of your payables due around the same time? You may end up with a negative cash flow. Negotiate with your vendors to stagger payment dates to help your cash flow. Cultivate good relationships with your vendors; they will be more willing to help you out.
- Harness technology. Accounting tools such as QuickBooks simplify cash flow management by allowing you to monitor your inflows and outflows at a glance, generate reports, track when receivables and payables are due and more.
What’s the best cash flow management tip you’ve ever received? Please share in the comments below.
Angela Kamanzi
Your Friend in Biashara
