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8 tips for managing your cash flow
If you don’t have accounting experience and you just started a small business, you may underestimate the importance of the correct management of your cash flow. Remember that cash flow problems are among the main problems that determine a business to fail, so be sure that your business is not one of them. Here are 10 advices about the correct management of your company’s cash flow.
Analyse the payment history of every customer
In order to make realistic assumptions about the time your company will get paid, you must know which customers are the ones who pay on time, and which ones are always late. Always adjust your cash flow forecast according to the experiences you had.
Understand your sales cycle
This is especially important if you own a seasonal business: you have to know the times when your sales volumes will be low. Make an accurate sales forecast in order to avoid situations where your cash is being blocked.
Look at the lead time for getting stock delivered
If you sell products, you always have to manage your stocks with great accuracy. You have to make sure you have enough stock in time, without purchasing too much o too early.
Review your competition
As a business manager, you always need to know what your competition is doing. Don’t be surprised by their sales strategy, and if you know when your competition offers discounts, be prepared to do the same. Always make sure the cash flow forecast is updated for any price movements.
Talk to your vendors
By building a good relationship with your vendors, they can be more likely to be flexible with their pricing if you need it. That doesn’t mean you have to become a persistent late payer, so always make sure to pay in time if you have the possibility.
Understand your tax liabilities
In order to be able to make an accurate forecast, you always have to know when your next tax bills will be due and how much you have to pay. Be sure to set aside some funds to be able to pay on time, no matter what comes in between.
Invoice promptly
Invoice as soon as you can, because you can’t get paid before you get the invoice, and it’s in your interest to get the cash as soon as possible.
Keep your bank informed
If your estimations show that you might be having a month or two with lower cash levels, talk to your bank. They may have some offers that can support you during harder times if you have a well managed business.
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Tagged in: cash flow manage cash flow sales cycle tax liabilities