Cash flow is the nervous system of your business. It registers the inflows and the outflows of cash. It helps you evaluate business better by cutting down costs. And so if it is up and running without any glitch no harm can befall your business. But what are the ways to keep this nervous system healthy?
Read on to know 10 practices for a healthy cashflow.
1. Find your pain points
It is important to identify your risks and be prepared in advance. Things like big order coming in suddenly or getting cancelled suddenly or you have a new unreliable client who is less likely to pay up etc. are recurring incidences and can’t be overlooked. In such cases one needs to be prepared with risk management.
2. Business account
Make sure to keep personal and professional lives separate. Start this practice by creating a business bank account for your business or you may consider asking for a business credit card from your bank. When you swipe these cards your expenditures get logged in into the bank system. This way you have a financial statement in hand of your purchases. This information can then be added to your cash flow statements.
3. Keep a check on your inventory
Check your working capital cycle and the inventory cycle.
4. Contingency funds
Even the government has contingency funds and every business should too. This is the money set aside for unforeseen events. This makes sure that in trying times you have reserves to manage the business.
5. Efficient system
You need an uber efficient system. If you procrastinate your recovery, then you need to just stop everything and bring a central system in place which will help you with speedy recovery of your bills and send out timely payables.
6. Cost cutting
This is the oft repeated catchphrase in any industry and the reason being is that it is the most efficient practice. Cut down unnecessary costs and spend the same on the essentials of your business. Check your accounts to see which cost can be minimised.
7. Focus should be on cash flow
The word synonymous to business is most likely profit because that associated as soon as someone utters the word BUSINESS. But that shouldn’t be the case. Your focus should be on your cash flows. If your cash flow is in order, you are sure to make lot of profit.
8. Systemized accounts
Always have a look at your accounts to understand where is the money lying. Even if you are not good with numbers, ask your CA to give you a data of the cash in and out. Also, check the profit margins and the expenses on monthly basis so that even your finance and accounts are on track. Your numbers should speak about the business. Always advisable to have real time update of the accounts.
10. Receivables management:
It is always important that you have a system in place to manage your accounts receivables. Always frame a system for each party. Check your outstanding. Don’t rush for follow up at the last moment when there is little balance in the account. If proper follow up and credit period is taken care of, receivables can well under control and you can always have your money on time. Analyse your receivables monthly to see who did not make the payment on time.
We are sure this post was helpful. But to get more hands-on knowledge about cash flows If you have any query, do get in touch with us on our email id and we would be happy to help you.
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