Cash flow planning tips
As a manager you have a number of responsibilities, one of which is managing your cash flow. No matter how large or small your business is, your cash flow is going to be the lifeblood of your business and you must be able to learn how to manage it.
The cash flow is a combination of sales, collections, assets, and receivables. When all these things are grouped into one category, you have to successfully control every part of it so that the company doesn't go under.
Your cash flow is used to pay for all your debt obligations. If your cash flow is in the red, it means you have a negative balance and you will be unable to come up with the necessary funds to pay for your operating expenses. Your company is in a serious financial problem if you reach this point and some of your options include selling off your accounts receivables, a process known as factoring. Another option you have is to take out a loan to pay for your operating expenses, but this is risky as you can get into debt deeply and you will not have money to pay back the loan. Learning good cash flow techniques is essential, but it can be frustrating for some people. If you would like to avoid declaring bankruptcy and becoming highly embarrassed, here are some simple tips you can follow and learn how to control your cash flow:
1. Take a look at your accounts receivables. Cash flow problems often arise due to your accounts receivables. A lot of companies simply do not understand how to ask people to pay their bills on time. Small business owners often struggle with this because they don't like to ask their loyal customers to start paying their bills. If your payment terms are spread out too long, consider reducing them and apply harsh penalties if a person will not pay their bills on time. Factoring is another great way to get the money that is owed to you. Factoring involves selling off your past due accounts to receive a lump sum of about 80% of the total past due amount. Aggressive collection policies are a must in any business and you will develop stronger customer relationships as you develop a mutual respect between the two of you.
2. Increase your sales. A great way to take care of your cash flow problems is to look into increasing your sales. Start selling more and require customers to pay half of their balance now instead of later because this should at least cover your break-even expenses. Don't always focus on the big sales as they sometimes take a longer time to pay. Your best option is to try and focus on a number of smaller sales that you can easily collect on. This way you will get all the necessary funds you need to cover your expenses.
3. Control your accounts payables. In order to help your cash flow problems, contact a few of your suppliers or vendors. You should look for different ways in which you can extend your payment terms. This will help you have a few more weeks in between collecting the money you need from your customers to pay for your payables. Pay your bull the day before it is due so you don't get any past due account fees and so you can still stay in good standing with your creditors and suppliers.
These 3 tips can help you learn how to manage your cash flow a little bit better and you won't have to worry about dealing with the option of taking out a loan to pay for your operating expenses.