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Ways To Improve The Management Of Your Cash Flow

Sep 22nd 2015 at 3:57 AM

Cash flow management for small businesses can turn into a big headache sometimes. Proper consultation solutions with the right financial guidance can help in such situations. While it is important for every organization, those starting out cannot afford to neglect this aspect. Analysis of cash flow mainly involve three things namely:

  • Accounts Receivable
  • Shortfalls
  • Accounts Payable

Effective management of all these three is quite important to navigate towards success. Ideally, management should be in keeping with your profit line for best results. Here are some things that you can do:

  • Determining breakeven point: it is important for you to realize the exact turning point for your business from where it will start making profits. This may not be necessary for analyzing your cash flow but helps you to set goals with ready-made targets for projections of cash flow. Negative profits and cash flow together is a combination for disaster.
  • Cash flow maintenance: breakeven point automatically becomes the benchmark for your company. Even when you reach here, effective management of cash flow remains necessary from that point onwards. For business life, this is the second stage.
  • Cash reserve maintenance: cash shortfalls are part of every business. Maneuvering around them depends upon your acumen. With some monies reserved in your accounts, you can now concentrate fully upon cash flow without worrying too much about shortfalls.
  • Immediate collection of receivables: net 60 and net 30 terms associated with contracts should remain at minimal levels. Ideally, you should delegate someone to keep an eye upon receivables and for periodic contacts with the customers. This can prove to be an important part of your cash management strategies.
  • Encourage faster payments: payment of early discounts and strict credit requirements are needed for the customers. Establish written standards to determine credit eligibility while enforcing rigid standards. After all not every customer opens up your business' doors is not eligible for credit.
  • Extension of payables: emphasize on getting the best deals related to your payables and extend them to net 90 on net 60. Some suppliers may even charge a late fee, but for this, timely payments are important.
  • Designating monitor for cash flow: trustworthy employees should monitor the cash flow for best tracking.
  • Creative incentives are important: boosting sales quickly is possible only when you try to be creative. This involves sponsoring contests, hosting events related to customer appreciation, referral incentives, and publicity tour for employees.

Surviving shortfalls and effective management of your cash flow requires some hard work. There will come a time when you will fail to have ready cash in your hands. In such situations know that you simply cannot depend upon banks to extend you the monies. You can always establish credit lines with their financial institutions for that rainy day. This way, one can borrow preset amounts anytime, whenever needed. Other than bankers, suppliers are also ideal people to help you out in such situations.

Ensure the best working capital management strategy and more by visiting the website

About The Author

Tony Rogers is an expert in modern computing and related services who likes to write many interesting articles and blogs, helping people to understand the nuances of the industry. He recommends as the best name to trust for the most reliable cloud computing services.

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