Incoming and outgoing expenditure, payroll, tax and VAT returns are just some of the financial elements of a business that must be carefully managed.
Good finances will ensure that a business does not fall into debt, expenses can be covered and potential growth can also be planned, this is otherwise known as cash flow management.
Cash flow management is a process that enables a business to operate with relative financial ease. With well-managed cash flow, everything from employee wages to new business opportunities can be easily covered.
This financial ease is crucial for a business that wishes to maintain steady growth in a competitive environment.
For the owner of the SME, with a number of daily tasks to deal with, focus and attention is often spread too thinly.
Whether dealing with customer service, sales, employees or complaints the attention and care that your finances require can easily slip and cash flow can become a nightmare.
Being able to maintain financial control can be the difference between long term success and failure. After-all if a business struggles to cover employee costs and rent then it can be difficult to recover.
In order to ensure that your business is able to successfully manage cash flow, keep the following points in mind...
Try to always aim for a positive cash flow or at the very minimum ensure that you are able to have a comfortable cash cushion that your business can fall back on. It is crucial to aim for having more money coming in than going out as this will ensure that any one time, you will comfortably be able to pay off your bills with ease.
Make the effort to review your accounts and prepare cash flow forecasts so that in the coming months you are aware of exactly what your business will need to keep afloat.
It is important your finances are maintained daily. From the accounts payable and receivable to inventory and expenses, keep on top of everything and catch any negative cash flow before it becomes a real problem.
Generally speaking you may have set terms and conditions to ensure that your customers pay within a time frame however unless you monitor this daily, it may quickly spiral out of control.
Understand your accounts receivable and chase up late paying customers to ensure that you are able to maintain a steady incoming flow.
Managing cash flow is never an easy task. The pressure of the daily care and attention business finances require is often the reason why many business owners chose the services of an accountant.
Whether you outsource or consider managing in-house, it is important that all financial areas of your business are regularly monitored.
For any business owner it may be a dream to always have more money coming in then going out but with well-managed cash flow there is no reason why this cannot become a possibility.