Cash flow can help to monitor the health of your business on a daily, monthly or yearly basis. A cash flow monitors how much money is coming in and out of your business which can help with budgeting, determining when sales need to increase and in managing loan repayments.
A positive cash flow is when move revenue is coming into the business than expenses going out, which is an ideal situation for most companies. However, a positive cash flow isn’t often likely, especially for smaller businesses and start-ups.
Increasing your cash flow isn’t all about making profits, although that definitely helps. But there are other ways you can manage your cash flow to help ensure that you are staying in the black.
- Create and update your cash flow forecast
One of the most important ways of increasing your cash flow is to always conduct a cash flow forecast on a regular basis. Most businesses plan a forecast for between one year and five, depending on the size. However, it is always useful to do shorter forecasts as there can be more accuracy in them.
They can be used to predict when you may need a cash injection so that you can plan accordingly on a month by month basis to make sure your costs are covered.
- Communicate with suppliers
Managing when money is coming out from suppliers can be key when managing your cashflow. When new suppliers come along, perhaps try and adjust the payment dates on a different day to others so you’re not paying everyone in one go.
In addition to this, if you’ve built up a relationship with regular suppliers you can try to re-negotiate payment plans or see if you can bulk order to get discounted rates.
- Conduct a risk assessment
It is always worth doing a risk assessment for the cash flow of your business; you never know when unexpected costs may occur. Try to envision every solution for your business when putting together your cash flow forecast to identify and risks that you might face. It also may be worth putting an extra pot of money for the business somewhere to cover these risks.
- Stay on top of budgets
You can use previous years’ expenditure and cash forecasts to compare against the current years’ expected budgets. If there was something that cropped up last year that you haven’t budgeted for then it may be worth taking another look at your cash flow.
Budgeting can play an important role in ensuring you have enough cash every month to cover your expenses so it’s always worth doing, in addition to your cash flow forecast. It can help to identify areas of spending that you could be cutting to increase your cash flow.
- Improve business efficiency
In 2019, there are plenty of opportunities to improve business efficiency through the use of technology. Enhanced telecommunication through networks and the internet can help businesses communicate automatically without even the need for human interaction. This can drastically improve on the efficiency and performance of your operations.
These types of solutions can help to save both time and money, meaning your business can be more profitable with a much healthier cash flow.
- Review your pricing
It’s not always ideal for customers when businesses up their prices, but it may be that you aren’t charging enough for some of your services. In addition to this, you may have increased your business size and feel that you’ve gained skills and knowledge that will benefit your customers.
Don’t underestimate your company and its position within the market. You can stay competitive whilst still giving your prices a rethink.
- Target new markets
Innovation can be vital for companies to stay afloat. Industries and markets are constantly adapting. Targeting new markets could help to bring an extra influx of finance to your business whilst still being able to offer the same products.
Investing in marketing or additional sales could help you boost your profits.
- Keep on top of management accounts
By managing all your accounts efficiently, you can make sure you’re being paid on time as well as paying others. Keeping all your documentation including invoices, balance sheets, purchase orders and contracts can ensure that your accounts are being managed properly and can help to make sure money is coming in and out of the business at the right time.
- Negotiate company voluntary agreements
It may be, if you are really experiencing difficulties that you can re-negotiate some payment terms. You could extend some of your repayment terms and pay over a longer period of time instead. Alternatively, company voluntary arrangements can help to reduce the cost of your repayments and give you a bit more time to source the funding.
- Find additional funding
If you have planned your forecast and budgets and feel that some months you will be low on cash, it may be worth trying to find an additional source of funding to cover yourself. This may be through a bank loan or creditor. Alternatively, you may be able to crowdsource or find new investors that can help give you a quick cash injection when you need it.