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A Quick Guide on How to Manage your Cash Flow

Cash flow in your business is very important to inspire the growth and profitability of your business. How you manage cash flow will determine your day-to-day business progress. Poor cash flow management may be detrimental to your enterprise. You may be unable to pay staff, restock supplies or even meet business expenses on time.

We have researched four efficient ways to manage your cash flow better so that your business can grow and be more profitable.

Escape the year-one Obstacles

Most new business owners in nearly all industries identify cash flow as a leading obstacle to growth and success.

Keeping up with the cash flow gaps for a new venture may be hectic, as these businesses mostly find low or seasonal sales. Therefore, it’s important to have as much cash on hand as possible or a secure line of credit to meet the ever-emerging business expenses.

Have a cash flow forecast

Based on your previous sales and income from your business, develop a cash flow forecast. A good and reasonable forecast will help you make proper estimations for the future. Start by making a list of expectations to set your forecast. 

Consider predicting an increase in production cost and material, then identify what you will charge the clients. Also, consider the change in seasons and the business environment and set a projection for either an increase or reduction in the sales. You are also expected to factor in outgoing finances such as salary increases, cost of expansion, and the repair of worn-out equipment.

Always manage the inventory.

Managing your inventory flow to efficiently meet your client’s needs and avoid spending on excess inventory and storage space becomes important.

Same as cash flow management, it’s necessary to have an inventory forecast that will help you keep up with the changing trends in your industry and reduce the risk of having plenty of dead stock. You can achieve this by analyzing your sales history and constantly following up on suppliers and customers to identify changing trends.

Utilize surplus finances to spark growth

It’s worth noting that studies indicate that for every dollar borrowed from online lenders, a business is likely to increase sales by $2.30. Therefore, when a business has found its footing in the industry and can access additional funding, it is necessary to find ways to utilize this cash to spark growth in your business. 

For example, some small businesses increase cash flow by investing in new equipment and inventory to increase sales. Other merchants opt to expand operations, such as opening another branch elsewhere or increasing the number of employees to improve productivity.

Business owners who succeed generally claim they invest back their profits into areas in their business that they feel require improving. 

Having cash at hand may be the lifeline that determines whether your business may enjoy extended success or whether volatility and uncertainty may bring failure and losses. So always make time to review your finances and build upon your forecasts. Ensure you seek professional advice where necessary.