With ever-increasing supplier prices, a rise in interest rates and a looming recession, managing your business's cash and understanding the flow are now vital tools in maintaining resilience and being able to adopt flexible strategies for success.
Cash flows are a reflection of all the cash that is
flowing in and out of a business. Owners can look at the direction of the cash
flows for insights into the health of specific products or services and overall
market patterns.
Some types of businesses are more likely to run into cash
flow problems, while other types appear to be more resilient. If you are a
business owner, you might be wondering which category your business falls into.
No matter how inventive or straightforward your business model is, you can
still have problems with cash flow. Here are our thoughts on managing the flow
of cash in your business:
The first stage of understanding and predicting how funds
flow is to perform a health check on your accounts. Look at your latest profit
and loss statement and check that your income is sufficient to cover your
expenses. If your profit is falling behind your expenses and cash flow is
slowing down, you might need to take action. Prepare a funds flow statement so
you know where the money goes.
Next, create a yearly budget and look where cash could
become tight and months where you can save to cover the quieter times. Look at
those quieter months and think about flexible work scheduling, new products or
services or other activities to tide you over.
Finally, make sure you collect your money from those who
owe you quickly. Reward customer loyalty by offering early bird discounts, and
set credit limits and payment terms to ensure customers follow the rules. If
you take on new customers, make credit checks. Penalise late payers and request
upfront deposits or payments.
Talk to us about preparing a funds flow statement and
annual budget so that you can work on your business for maximum success!
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