Let’s talk finances. We know, it can be hard to separate yourself from the situation when you’re putting your heart into all things related to your business, but when it comes to finances, you need to think objectively. This is especially true in the growth-phase of your company. To be a successful entrepreneur means that your finances are on stable ground. To establish this foundation, managing your cashflow effectively is essential.
Keeping a close eye on your company’s finances while thinking strategically about the structure of your cashflow will allow you to make every dollar count. Here’s three tips on how to go about that:
#1 Slow the outflow of cash
Closely monitor the cash leaving your company. Reducing your cash outflows might seem like an obvious first step, but it’s not only about reduced spending. Picture this:
- Be strategic about your expenses: evaluate new ways to structure employee compensation to coincide with cash inflows; use a credit card to pay for liabilities – this gives you extra time to pay your balance and who doesn’t love reward points? (Points that can also be used as “cash” later).
- Manage your inventory and equipment: unnecessary inventory may mean additional management, maintenance, and storage costs. Pondering nonessential equipment? Consider leasing certain items to limit major expenses.
- Read the fine print: review your contracts with your suppliers and take advantage of procedures that let you pay within a longer time frame if needed.
#2 Accelerate the inflow of cash
Who doesn’t want more cash in their company’s account? The key is to be creative and proactive.
- Think outside the box when it comes to your customers. Find new ways to improve your accounts receivable collection rate. Encouraging your customers to pay faster via a discount or an extra incentive can make all the difference.
- Talk to your financial institution about short-term funds: whether you are thinking about getting a new line of credit or a working capital loan, financing options can help increase your inflow of cash.
- Get the credit you deserve. Different subsidies and tax credit programs are available. A qualified business advisor can help you explore your options.
#3 Keep everything tracked
It’s not enough to know the number on your balance sheet, it must be a combination of careful vigilance and well-advised planning. Having a solid understanding of your activities, your financing, and your industry – and how each impacts the other – can help you build a thoughtful strategy.
- Keep all your books up to date: knowing the status of your company’s finances allows you to work smarter not harder; ultimately, it can lead to more confident decisions based on facts and accurate information.
- Be tactical about your company’s business activities: always give priority to activities that will generate value. Consider all your expenses carefully and cut ones that are unnecessary (here’s where that objectivity really comes into the picture!).
- Be proactive about financing: the process involved in obtaining financing can sometimes be long and hazardous. It’s important to keep those potential delays in mind when planning your business activities.
There are many ways to perfect cashflow management, but the winning formula is dependent on being strategic, thoughtful, and objective. It may be challenging at times to tackle those tough questions head on, especially during times of uncertainty or economic instability, but that’s why we’re here to help. Working with an independent business advisor can save you a lot of worries, and help you anticipate and resolve problems as efficiently as possible.