In business, cash allows people operate. Therefore, managing your cash resources will not only allow you have enough cash to meet your needs but will also ensure that your business stays afloat. It is important to keep track of the cash inflows and outflows so as to balance them. This will be your gateway to maintaining your business in a healthy way. In this article, we are going to discuss how to maintain good cash flow in a business.
1. Set cash flow target
One way of ensuring you maintain good cash flow in your business is to set targets. You should be able to work towards the realization of the targets so as to ensure the business is always having a healthy account. The inflows will ensure that the business can pay for itself and need not borrow funds to run it.
2. Agree on payment terms
Clear payment terms for both your suppliers and customers is very important for your business. This will be a security for ensuring payments are done on time. If payments are done on time or not, you will be able to know and take measures to address the issue before it gets out of hand.
3. Make payments easy for customers
Have an easy payment system for your customers. This will ensure a smooth way of collecting inflows. Avoid as much as you can cheque payments as they cause delays. If possible, have a pay on delivery or purchase mode of payment as this will allow you make a record of the inflows and outflows.
4. Invoice quickly
Knowing when to invoice your customers is very important. Do not delay to invoice your customers if the order is ready as this will lead to delays in payment too. Be very prompt in invoicing customers and get payments done in the shortest time possible. Keep a record of the invoices so as to have a record for future referencing.
5. Focus on the cash flow and not profits
The cash flow of your business will go a long way in maintaining your business operations. It is advisable to work with customers who pay on time. It does not matter if this will discourage some customers because you need a good cash flow to make it in the business world. Be sure not to overlook your payment terms for the profit margins.
6. Train an employee to manage the cash flow
Train one of your dedicated employees to keep a sharp eye on the cash flow movement. The employee will be charged with keeping the business activities up to date to ensure there is sufficient cash hat the business can operate on.