Without a healthy cash flow, a business is bound to die sooner than you think. However, obtaining healthy cash flow is not always easy, especially for new entrepreneurs. According to a recent survey, this issue affects about three out of five businesses in North Carolina.
An unfortunate fact is that managing cash flow is easy with a few tips. Instead of following the professional advice of an accountant in Charlotte, NC, people go with their gut feeling or take advice from inexperienced friends. This results in a blunder.
Tips for managing cash flow.
- Create a cash flow forecast.
To manage your cash flow, it is important to make regular cash flow statements. It can help you notify us of any problem before it arises. It is very crucial as you will need to make decisions based on the cash flow forecast.
Make a list of assumptions on which you will base your forecast. Include an estimate of the price increase of raw materials and what you will be charging from your customers. A forecast of your sales growth or decrease should also be included.
- Offer early payment discounts.
Offering an early payment discount is another way to improve your cash flow. Early payment discounts are discounts that suppliers or vendors offer to their customers to pay their bills or invoices in a certain period of time.
For example, a supplier can offer a 3% discount if the customer pays the bill within ten days. It encourages the customers to pay their bills early and hence improves the cash flow. However, if a customer makes a late payment, the interest will be added, and you will always have an extra amount at hand.
- Secure credit ahead of time.
It is crucial to secure credit ahead of time. Many small businesses often make this mistake and wait until it becomes necessary. To know your expected revenue, you should talk to experienced businessmen in your area or locality.
Examine the situation and make a realistic plan. Secure as much credit as possible, especially if you are a small business owner. Secure credit ahead of time to be prepared for the unexpected.
- Identify your expenses.
It includes supplier costs, wages and salaries, rent and rates, and the purchase of new assets. You will also need to add insurance premiums and interest premiums. You can use your bank statement from last year as a checklist to predict new incomings and outgoings for the next year. It is important to know roughly how much money you will have at the start and end of each month, as well as after six months and 12 months.
Without the help of a professional financial guide, it can be difficult to manage business cash flow, especially for new business owners. Hire an accountant and take control of your finances today!