When it comes to cash management, it is important to find a solution and a balance between paying out money to suppliers and employees and the payment of your receivables. It might be a smart move to delay all payments and encourage those who owe the business money to pay back first.
Here are some ways for effective cash management:
Measure the cash flow accurately
It is important to prepare projections of future cash flow; you can do a yearly or a quarterly projection. If the projections are accurate, they can alert you of financial trouble. When making the projections, consider the expenditures, receivables, and the vendor’s patience. Do not forget vital factors, such as loan interest and capital improvements.
Manage the receivables
If every customer paid the moment they made a purchase, there would be no cash flow problems. This is not always the case, but you can improve your cash flow situation by managing the receivables. The idea of managing receivables is that you increase the rate at which the receivables are paid. As Venturebankonline.com points out, small is powerful in any business. Some techniques that you may use include offering discounts to customers that pay for their purchase.
Manage the payables
Expenses are a great portion of the business; you need to control these. When your expenses are growing faster than the sales, this is a red flag. Read the signs and examine costs more carefully; look for places to make cuts. To manage payables, consider the payment terms of the creditor. When choosing a supplier, pay attention to those with flexible payment terms and those with the lowest prices and discounted offers. This helps in keeping costs low.
With smart planning, you can manage your cash better and grow your business even further.