Business programme: How to manage your company’s cash flow
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The cash flow is your company’s life source. It refers to the money that comes into your business from your customers. It’s what keeps your company operational to earn money and process transactions.
After hearing all this, it makes you think of your company whether you can successfully manage it to prolong its lifespan. To help you with your problem, below are some things you can do to keep track of your cash flow.
Keep track on journals
To get an overview of your business, the best way to do this is to track your journal or records. Journals contain all of the business transactions that your company has made, such as sales made, cash made, equity, and other journal entries that concern your business. With your journal, you will have an insight into how your business is doing daily, and you can also use it to evaluate the company’s next step.
To have an efficient and organized journal, you need to apply bookkeeping techniques. Bookkeeping refers to recording your business transactions in an organized manner. If you are not familiar with bookkeeping, you can hire an accountant to manage your business journal. To give you a peek at what bookkeeping techniques are, below are some examples:
- Single-entry bookkeeping
- Double-Entry bookkeeping
- Accrual-based
- Cash-based
Each bookkeeping technique has different methods; thus, finding the right one to implement is crucial for your business. For instance, if you are just starting with your business, implementing a complex method in bookkeeping can lead to complications that can bring your company down. The best way to do this is to consult professional bookkeepers to choose the proper technique for your business.
Expedite accounts receivable
When you say accounts receivable, these are your customers’ debts either for your merchandise or services. If you’re wondering why you need to speed up your accounts receivable, it can affect the cash flow. When the time comes, you will create a summary of all your business accounts, which would lead to a shortfall.
To help you speed up your customer’s debt, you can create some promos so they can gain benefits such as discounts if they pay early. Or you can also make your payment terms short so that you will not wait for a long time for the payment. Another alternative would be to subscribe to some services, such as a debt collection agency, to help you collect the debts of your consumers and speed up their debts.
Generate cash flow statements
Cash flow statements refer to the money going in and out of your company. It allows you to foresee where the money went and came from to understand how your company attained its current money.
Foreseeing your cash flow statements can help you in different ways, such as maintaining your balance, generating cash, or short-term planning. It also plays a massive role in making investments to expand your company further.
Allocate loans
Shortfalls are inevitable to any company. Loaning to banks is your way to solve those missing amounts and manage your cash flow successfully. Aside from loaning to regain shortfalls, You can also use it for your business expenses and investments. It is an excellent way to increase capital and generate more cash to increase the profit of your business.
It’s not necessary to apply for loans all the time; make sure that you can return them on time with no drawbacks when making these loans. If the result of your borrowed money didn’t make any changes to your business or gains, it would end up being useless. Thus, make sure to plan how you will use the money to put your business in a better spot.
Create cash flow projections
Seeing the future is another way to help you maintain and manage your cash flow. Through forecasting your financial position, you can determine possible shortfalls and oversee if they can keep up to pay their expenses and employees. In other words, these projections provide you with a picture of how the company will do in the next coming years.
Another benefit of cash flow projections other than managing your cash flow is they can impress your investors. If they see that the company has or is living to its potential, they can invest more in the growth of your business and increase your cash flow.
Final thoughts
In general, these are some things you need to consider in managing your company’s cash flow. There are more factors to oversee when it comes to cash flow. Take time to study and learn more about different techniques in managing your money. If so, it will indeed help your business grow and expand dramatically.
