When running a business, “cash flow is king” is a phrase you may have heard thrown around and honestly, it’s not untrue. Many a fundamentally sound business has found itself going under due to running out of cash, especially if owed some money. It’s good to think about and plan ahead to avoid this. Let’s have a look at the ways to do this.
Make A Business Plan – Project Income and Expenditures
Creating a business plan is always essential in running any company. It will give you a document to refer to and predict, giving evidence, of where your customers and income are going to come from, what resources you need, and what challenges are to be overcome. The plan document will give you a road-map, showing you where your success and growth will come from. Be sure to plan for not just the bare minimum, but ensure there is a bit extra in case of any tough times ahead
Keep Receipts and Maintain Accurate Bookkeeping
To be able to properly assess if your cash flow is healthy is of the utmost importance and therefore it’s crucial to ensure that good bookkeeping practices are upheld. You can do the bookkeeping yourself or you can engage a professional to do it for you. It may seem that a bookkeeper is an unnecessary expense, but keeping things organized can be time-consuming, and if it’s done regularly and accurately you can ensure you have up-to-date information that will allow you to step in early in the event of a cash flow issue.
Rent or Lease to Save Cash
Especially when you are starting out, you want to keep as much cash in the company account as possible. One way of doing this is to lease instead of buy certain items and equipment. Almost everything can be leased, from IT hardware and software, office furniture, and commercial leasing on vehicles, all of which can make huge savings.
Ensure There Is a Procedure for Employee Expenses
If you allow your employees to make purchases on an expense account, then you should have strict and proper procedures for monitoring this and controlling spending limits. You should draw up a template for recording expenses, such as this one, and ensure that they are always checked and authorized, and that any over-spending is addressed quickly.
Chase Unpaid Invoices
Unpaid invoices are often the biggest problem with the cash flow in a small business, so it’s important to ensure you have a rigorous system for chasing these up. You should first of all make sure your terms are clear on payment dates, and follow up invoices with reminders. This is often all it will take, but if need be, you should be willing to take legal actions against customers who have not paid their invoices.
Regularly Review the Situation
With your cash flow, it is important to regularly assess the financial situation, and when you come across any problems, put a plan into action quickly to change course and save the business before it’s too late.