Maintaining healthy cash flow is essential to any business. However, sometimes delayed payments from clients and other problems make it difficult to compensate employees, obtain needed equipment and supplies, and settle with vendors. Profits are pointless without effective management of cash flow. Here are some tips on improving the cash flow for your business.
Keep Separate Accounts
An important aspect of improving company cash flow is maintaining separate bank accounts and credit cards for your personal and business finances. This allows you to more effectively monitor company income and expenses using a spreadsheet or accounting software.
Starting and maintaining a thriving business is an enterprise fraught with challenges. Reduce the risk by making weekly, monthly, and quarterly cash flow projections. Anticipate possible difficulties before they occur so that you are not caught unprepared.
Another essential part of healthy cash flow is a continual and steady source of income. Facilitate this by sending out invoices immediately after delivery of goods or completion of services. Consider progressive invoicing for larger orders, and reward customers with discounts for early payments. However, impressive profits are meaningless unless you control expenses. Watch for opportunities to cut costs. Additionally, don’t spend money storing what you don’t need. Get rid of excess inventory and obsolete equipment. To keep working capital in your account, hold off paying vendors until you are required to do so, as long as you don’t jeopardize your credit score or business relationships.
Prepare for Emergencies
Even with effective cash flow management, difficulties inevitably occur. Always keep a supply of cash as a buffer against unexpected emergencies. Initiate lines of credit with financial institutions when things are going well so that you have something to fall back on in times of need. Use long-term financing for large purchases such as equipment and real estate to preserve working capital for immediate expenses.
For more advice on improving business cash flow, get in touch with IRC Commercial Lending.