Tips on Managing Business Cashflow

Managing cashflow has been identified as a key factor in determining the financial well-being of a business entity. Below are some tips on managing business cashflow.

Set Cashflow Targets – One way of controlling cashflow is by preparing and maintaining a cashflow forecast.This can be updated weekly, to provide an accurate outlook for the next 6 to 12 months.

Agree Clear Payment Terms – Establishing clear payment terms from the outset is important. If you don’t start off knowing what your payment terms are, it is difficult to know when you are going to get paid. If you don’t know when a payment is overdue, how are you going to manage your cashflow. For construction firms working on government projects, an Act of Parliament commits to payment within 30 days down to the third rung of the supply chain.

Invoice Quickly – It is important to invoice clients as soon as the work is completed. If you wait two weeks after the work has been complete, then it should be fairly obvious that it will take a further two weeks before that cash arrives in your bank account.

Make Payments Easy for Customers – Making payments should be made as easy as possible for your customers.Try to avoid being paid by cheque as it will result in delays before the money arrives in your bank account. Online payments are a much better option.

Offer Clients Fixed Rate Payment Packages – One way that SMEs can ensure good cashflow is by offering periodic payment packages.The peace of mind this gives is priceless.

Use Technology More – Technology can make it much easier to manage cashflow. Accounting software can also help entrepreneurs with limited time for administration.The convenience of having reliable accounting software and advice goes a long way.

Keep the Bank Informed – Keeping the bank informed over any unforeseen outgoings and changes in forecasts is very crucial. Banks can offer businesses useful services like overdrafts or credit, particularly when they are starting out.