One of the essential needs that every business looks for is constant cash flow. Cash flow is nothing but constant money coming in and going out and is the life of any business. Without a constant cash flow, no business will be able to survive for long. However, there are times when businesses have not been able to manage cash flow and their financial management plans have gone awry. Here are 7 tips for businesses to manage cash flow.
Usage of technology to manage cash
With the advent of technology, it has become easier for us to do things which earlier might have been a bother. Functions like cash management have become streamlined and easy to handle after the appearance of apps.
For businesses, seeking a business loan or MSME loan, these apps can correctly analyse the exact cash flow at any given point in time. Having a constant focus on cash management will improve the entire system of cash management.
With technology at hand, it is imperative that is used for the benefit of the business owner. One only has to visit the online stores of Android and Apple, to check out the numerous available apps. The main focus of these apps is to provide accurate information related to the flow of cash and the overall financial health of the business.
Rent is the way forward
Many businesses make the mistake of buying expensive equipment, the use of which dwindles in a short period. It is the same with real estate. It is always advisable to rent rather than spend a huge amount of money upfront.
One of the other pitfalls of buying upfront is that the depreciation of the asset may be drastic and once the usage is over, the selling price may not be attractive anymore.
But paying a reasonable amount monthly for equipment or real estate, there is a certain control over the cash flow. This bodes well for the financial health of the company.
The idea of a remote workplace used to be unimaginable at a point in time but with the raging pandemic, it has become a reality. However, working remotely works wonderfully well for the companies. The working cost of maintaining a facility is huge.
With employees filling in the workspace there is added expense of electricity and other facilities. Moreover, transporting them from their homes to office and back adds to the cost immensely. Hence, working remotely works well for the company vis-à-vis costs and cash flow.
Extension of monthly payments
While dealing with vendors it is always advisable to have flexible payment options. There will be months when the cash flow might be tight. So extending the 30 days payment option to 60 days works positively for cash management. However, it also needs to be seen that there is no penalty added otherwise the entire purpose is defeated.
Incentivise early payments
One of the best ways to gain the attention of customers and encourage them to pay early is to incentivize the entire scheme. Those who pay early will be provided with a discount or a gift is one of the best ways to make people pay early.
This works wonders in the service sectors. The faster the cash comes in fast, the faster will it roll? Gifts cards and discounts are a guaranteed way to make customers complete their payment, before the due date.
One of the best ways to prevent a nasty financial surprise is to forecast financial needs. Anticipating future needs is one of the hallmarks of a great businessman. One can forecast the need for a CGTMSE loan or a Udyog Aadhar and prepare oneself for it. Cash flow can be better managed if the future is forecasted well.
Let the Cash earn
Keeping idle cash in interest–earning accounts is a great way to make the cash work for you. The extra money earned through interest can be invested back in. In this way, there will a constant flow.