Cash flow refers to the movement of cash in and out of a business. It is the capital required to run your business on a daily basis. For a smooth functioning of the daily operations, it is essential to manage your cash flow. Consider the following tips to manage your business cash flow suggested by chartered professional accountants.
Record and Analyze Regularly
The very first step in proper cash flow management is the recording of every transaction being made in the business on a regular basis as this will avoid the chances of missing out on any transaction. Up to date records will allow you to analyze your cash position and determine your future cash requirements. You will therefore be well-prepared with sufficient cash as and when payments for expenses are due.
Manage Receivables and Payables
The two major factors which affect your cash flow significantly are your receivables and payables. When you are paid for a product or service immediately, your cash flow is maintained. However, if the payment is to be received later, it creates a discrepancy in your cash flow. To make sure your cash flow is not affected ensure that you get timely payments, issue prompt invoices and keep a thorough check of pending receivables. Similarly, when managing your payables, make complete use of the credit period. For instance, don’t make a payment in 15 days if it due after 30 days unless you are offered any discount for early payment.
Reserve for Cash Shortfalls
You can never be fully prepared for any unexpected expenses. For situations like these, having a reserve of cash set aside for such shortfalls is a must. Having a reserve of cash acts as a safety net to manage your cash crisis and avoid attracting any penalty for late payments in the form of interest.
As an entrepreneur, there are various aspects of business you need to look into. With too many business responsibilities, you may end up not maintaining records of your transactions on a daily basis. This leads to discrepancies in the future. Therefore, it’s recommended that you take professional help. Having an accountant to look after your daily transactions will not only allow you to manage your cash flow but also have an updated accounts statement. This can be very beneficial once you start with your corporate tax planning.
Another easy and error-free method to manage your cash flow is to make use of technology. You can make use of online accounting software such as QuickBooks to maintain your records and also look after invoices and payments. There are various types of software available for this accounting purpose. Choose a software as per your need.
There are many more methods to manage cash flow in a better way which chartered professional accountants can help you with. Offering discounts to debtors, raising invoices on time, informing debtors before the due date, etc. are some ways to ensure your payments are on time and you do not face the problem of cash shortage. To get more information about how to manage your business cash flows, get in touch with the best chartered professional accountants and experts.