Have you ever heard the saying “Cash is King”? There is nothing more important to a smooth-running
business than cash flow. Not only for the success of the business but the health of the business owner.
There is nothing more stressful as a business owner than the worry of not having enough money to pay
the bills or make payroll. Many businesses start out with the best intentions and want to please all,
including customers that want payment terms that may not be best for the owner. Strong cash flow
gives the business the ability to reinvest in the business for growth, have cash on hand for unexpected
expenses, and just peace-of-mind for the owner.
Watching your bank balance may not necessarily be the best way to manage your cash flow. Many
times, this is referred to as bank balance accounting. A business may have a “windfall” of customer
payments with a very high amount of bills that have not been paid yet or even received yet. Businesses
should be looking at their receivables weekly as well as a variety of other management reports on a
weekly or monthly basis.
What steps can a business take to increase cash flow?
It may be as easy as changing the terms of your invoices. Many businesses still have “net 30 days” and it might be time to change to “due upon receipt” or require a deposit. Most accounting software will allow businesses to email invoices and collect payment from the customer making it quite easy for the customer to pay with just a few clicks. Setting up your accounting software to receive payments can be a lot faster than waiting for a check to be mailed.
Many businesses get behind on their accounting and often this will delay invoices getting to customers.
Invoicing customers must be a top priority for every business. Customers cannot pay if they do not get
the invoice. Getting behind is a common problem for business owners so now might be the time to
consider outsourcing your accounting work. Hiring an accounting firm means your work will be done on
time, no worries about turnover, and a team of professionals who are just phone call or Zoom meeting
Most experts say we are going into a recession. If that is true, this would be a very good time to make
sure that you have a line of credit in place for your business for the ups and downs of business cycles as
well as the ups and downs of our economy. If your business does not have a line of credit or your
business has grown and you need to increase your line of credit, this is the time to make an
appointment with your banker to ensure the money is there when you need it.
There are many ways in which a business can increase their cash flow. Usually, it is just a matter of
taking the time to work on the business instead of “in it”. Taking the time each week to look at how the
business is doing, as well as making sure all accounting is up to date, will be well worth the time.