Best Practices for Managing Cash Flow
What is Cash Flow?
Cash flow is the net amount of cash and cash-equivalents (short-term commitments that are easily convertible into a known cash amount) moving into and out of a business. If you have more cash coming into your business than going out, it means that you have a positive cash flow.
The opposite of this is having less money coming into your business than is coming out. This causes a negative cash flow and can be a serious problem for a business of any size.
So what should you watch out for when managing cash flow? Look no further than here as we’ve created a post dedicated to cash flow management dos and don’ts.
Dos When Managing Cash Flow
Use a Qualified Accountant
Don’t walk this road alone. Where possible, get professional advice on how best to manage your cash flow. They can create a strategic cash flow management plan specifically for your business that you know you can trust. Doing this sooner rather than later could save your business any problems in the future.
Get an Annual Audit
Getting an audit will help stop any fraudulent behaviour in your business and will also give you confidence in your financial standing. This will allow you to manage your cash flow so that you can make well informed decisions about the future of your business.
Create a Cash Flow Forecast
A cash flow forecast can really help a business manage its cash flow. A cash flow forecast is almost like a budget, except you fill out your expected cash and where you think it will be spent. Having a cash flow forecast allows a business to set goals and to stick to a particular budget. You can download our cash flow forecast template here: GRID Business Sample Cash Flow Template 2019
Don’ts When Managing Cash Flow
Leave the Financial Responsibility to One Person
Not only is this not fair to the person, but it could mean more mistakes being made just simply down to human error. Managing the cash flow of a business should take more than one person if a cash flow forecast or budget will be accurate.
Accept Any Payment Except Cash
You should always get the correct payment for a product or a service that you have given. While it may be tempting to accept the promise of something like free advertising in lieu of payment, it is not going to increase your cash flow, or help you to plan and manage it either.
Hide from A Problem
If you see any sort of problem in your cash flow, do not hide from it. Instead, seek professional advice from an accountant or a financial advisor. You could also talk to your vendors/suppliers about extending your payment, or making regular smaller payments. Remember, it’s never too late to start managing your cash flow.
These are just some of the best practices for managing your business’s cash flow. If you'd like help with managing cash flow, download our free cash flow template and get started today.