Some businesses are more likely to be affected by the downturn and get into cash flow problems, while others will be more resilient. If you are a business owner, you might be wondering which category your business falls into. No matter how inventive or simple your business model is, you can still have problems with cash flow. Here are our thoughts on managing the flow of cash in your business:
- The first stage of understanding and predicting how funds flow is to perform a health check on your accounts. Look at your latest profit and loss statement and check that your income is sufficient to cover your expenses. If your income is falling behind your expenses and cash flow is slowing down, you might need to act. Prepare a funds flow statement so you know where the money goes.
- Next, create a yearly budget and look at where cash could become tight and months where you can save to cover the quieter times. Look at those quieter months and think about flexible work scheduling, new products or services or other activities to tide you over.
- Finally, make sure to collect your money quickly from those who owe you. Reward customer loyalty by offering early bird discounts and set credit limits and payment terms to ensure customers follow the rules. If you take on new customers, make credit checks. Penalise late payers and request upfront deposits or payment.
Talk to us about preparing a funds flow statement and annual budget so that you can work on your business for maximum success!
