For security reasons, your session has been timed out. To continue, Please login.
Cash flow is a measurement of the amount of cash that comes into and out of your business in a particular period of time. When you have positive cash flow, you have more cash coming into your business than you have leaving it so you can pay your bills, and cover other expenses
Cash flow, the total amount of money moving in and out of your business, affects how much cash you have. If cash is moving out faster than it’s moving in, you may run short of cash and may have to raise funds through borrowing, sale of assets, or raising equity.
You must monitor the receivables so you can act on invoices not paid on their due date. To help you monitor receivables you can:
Yes, bookkeeping matters! It’s the single best way to understand all the financial transactions in your business, and you can’t do the rest of the steps without it.
Do not rush to sell on credit. It is vital to assess the ability of your clientele to make timely repayments. Therefore, assess the creditworthiness of your customers, especially if their order is large.
This goes for all your customers both new and existing ones. In the case of new customers, you can scan through their financial statements and evaluate their credit reference. As for repeat customers, you can easily review their payment history.
Take the info from your cash flow statements, and use it to understand how money is moving through your business.
Accessing cash flow from account receivables calls for acute monitoring of invoices. For this, you should review your business’s account receivables ageing report. It is a record of overdue invoices based on the length of time they have been outstanding. An AR ageing report breaks down accounts by the number of days passed since the issue of invoices, such as:
Focus on recurring monthly, quarterly or annual expenses. Can you cut back on utilities, rent or payroll? Are you spending money on subscriptions or services you’re not using or insurance you no longer need? Can you renegotiate the terms of outstanding loans or leases?
Customers can get caught up in their business and overlook a due payment. So, it is helpful if you remind your customers by way of an email a few days prior to the due date. However, doing this manually can be cumbersome. In that case, you can also employ technology to automate this customer service feature and set up alerts that notify your customers of due payments.
Overspending cash can result either from covering unnecessary expenses, or paying for expenses at unstrategic times. Cut overspending to increase cash flow.
Find out the specific person, job title and address to send your invoices to so they don’t get lost in a shuffle from department to department. Design your invoices so they’re straightforward and easy to read, with key areas like due date, amount due, where to send payment and payment methods highlighted. Speed things up further by emailing invoices instead of mailing them.
So as not to give your customers reasons to delay payment
Whether you’re waiting on invoice payments from clients, or deposits from payment processors, the faster you get money in your pocket, the more cash flow you’ll have.
Make analyzing your statements a regular part of your back office routine. The more you do it, the better you’ll get at spotting opportunities to increase cash flow and nip shortages in the bud.