Cash flow is the net quantity of cash and equivalents going into and out of a business. It is a major indicator of the financial health of a business, by representing exactly how much in funds it has available.
As an essential piece of success, adequate cash flow is important to businesses of all types in paying expenses, investing in future operations as well as buffering potential future challenges. It’s essentially a key indicator on the overall health of a business, signifying just how efficiently it is bringing money in, and likewise sending it out.
This is something especially pivotal to small sized businesses, who have the most at stake in their endeavours to grow.
As such a serious concept, it is important to know what can be done in managing cash flow more effectively, and what options are available. The following are a series of tips on how local business owners can tackle these issues and optimise their cash flow.
Cash flow serves as one of the most straightforward ways to understand an organisation’s operational wellbeing. Because it directly pertains to the survival of a business, it is also one of the most important things to measure and monitor.
Quantifying the inflow and outflow of funds from a business and building a cash flow statement each month is an important exercise for all business owners, as it allows to identify important patterns. What recurring expenses does the business have? Are expenses higher in certain months? Is revenue coming in steadily or are some months slower than others?
This historical analysis, pared with forecasting expenses for future months, will help prepare for the months ahead, and understand how much cash needs to be set aside to cover all expenses during slower months.
Technology is dawning a new era in the world of business, introducing more innovative ways to get work done. From more efficient means of tracking payments to insightful analytics, there are a plethora of ways in which businesses are taking advantage of the digital sphere to streamline the management of their operations.
Online accounting softwares can be an effective way to keep track of customer payments. Business owners can monitor in real time what has or hasn’t been paid, and send automated notifications to late payers reminding them that an invoice is due.
Another important element to keep in mind is that making it easier for customers to complete payments increases the chances they’ll do it quickly (and on time).
From mobile POS machines to payment links, business owners now have a variety of payment options to choose from. Something they still need to be mindful of are the fees associated to those options as well as the time it will take for payments to reach their bank account (which can make a big difference in terms of cash flow for a small sized business).
If you’re looking for more efficient ways to collect your customer payments, Fuzey can help! With Fuzey, you can simplify your customers’ payment process and minimise the risk of late payments.