Improving Your Business Cashflow

Business / Tips

Improving Your Business Cashflow

Cashflow is vital for your business and often outweighs earnings in importance. Maintaining a robust cashflow keeps your operations fluid and equips you to absorb unforeseen costs as they arise.

Sustaining a healthy cashflow can be challenging, even in the face of robust sales. Real-time insight into your cashflow status is essential for covering outgoing expenses. Below, we outline some straightforward measures that can assist you:

1. Review Your Debtors/Accounts Receivable:
Many businesses encounter difficulties in collecting payments. If you establish 30-day payment terms for customers, ensure they adhere to the agreed-upon terms. Implementing invoice reminders and software to automate payment follow-ups can streamline this process. We recommend conducting a thorough analysis of the payment patterns of your tardy clients. Once you identify those prone to late payments, you can address the issue directly with the client or account for these late payments in your cashflow projections.

2. Conduct a Cash Flow Analysis:
Comprehend the inflow and outflow of cash within your business. Recognise the instances when cash is required and allocate ample time for strategising how to navigate these demands. Software solutions such as Futrli and Fathom can be invaluable in this regard. Regular analysis of your cashflow will unveil patterns that aid in effective planning.

3. Reevaluate Your Pricing:
Small and medium-sized businesses often delay price reviews and frequently undervalue their expertise and experience. Many businesses struggle to determine the appropriate pricing due to reliance on guesswork. Consolidating all your financial data in one accessible location allows you to enhance your pricing strategy and establish breakeven points more effectively.

4. Reduce Costs and Increase Sales:
While this may seem obvious, with fluctuating inflation rates and the current economic climate, it’s probable that your costs change every six months. Modelling cost increases is crucial for predicting future cash positions. Expanding sales can result in increased expenditures, such as higher wages and marketing costs. Therefore, modelling various scenarios is essential to enhance future predictability. The significance of real-time financial information is particularly underscored in environments marked by inflation and heightened costs.

By implementing these strategies and leveraging real-time financial insights, your business can navigate cashflow challenges more effectively and secure its long-term financial well-being.

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