8 Tips to Improving Your Cash Flow
1. Get a solid accounting system. Consider purchasing a software package, such as those offered by
Quickbooks or
Peachtree. You can also check out the free open source options such as
GnuCash and TurboCash. These programs generally offer a full range of features, such as financial reporting, payroll management, and billing- all of which will help you to stay on top of your cash flow.
2. Create a monthly cash flow schedule. Statistics show that most small business owners shy away from using financial metrics to help them run their businesses. While some owners may not know about these tools, most people may find it difficult to give up the time or resources needed to use them and instead rely on their income statements. The problem is that many of the factors effecting cash flow, such as outstanding accounts receivable or inventory, do not show up on an income statement.
This is where a monthly cash flow schedule comes in. A cash flow schedule is specifically designed to give you a clear picture of each component of your business and how it affects your cash flow so that you can project a future cash shortage.
3. Pay attention to receivables. There are many things that you can do to boost your receivable income. First, you should set up a structured billing system so that bills are sent out on time and that late payments are accurately tracked.
You can also require customers to make an initial deposit when an order is taken, and offer small discounts to those who pay their bills quickly.
Finally, you can factor those hard to collect receivables. Not only will this give your business a quick injection of cash, the factoring company will assume responsibility for collecting the outstanding payments. This frees up precious time and resources that can be directed to other areas of your small business.
