Continuously generating positive cash flow is important for the growth of a business. Expenses are cash-outflow, while sales are cash-inflow. Cash inflows come from different sources like collections from customers, receipt of proceeds from a loan or interest on savings.
Below are four steps to improve your cash flow:
If you are late in sending invoice to your customers, you are in effect financing their business and negatively impacting your business’ cash position. With timely invoicing, you will be able to collect timely and the better and faster the cash comes in. If you don’t have time to prepare invoice, outsource this task to your trusted bookkeeping firm. It is worth it.
Generate and Analyze Aging of Receivables Report
Be sure to monitor your accounts receivable aging report at the minimum, on a weekly basis. Customers with aged receivables should be sent a reminder and follow-up with a phone call as needed.
Managing cash flow is not only about getting or collecting more cash for your company. It also includes closely tracking the cash outflow or expenses incurred by the business and make sure these are necessary business expenses.
- Review Vendor Costs
Incurring expenses is normal, but incurring without reviewing is not a wise choice. Businesses incur expenses to be able to provide the product or service. Identify which vendor will give you the greatest opportunity or most benefit. You can start off by renegotiating current pricing or leverage on volume discount, when appropriate.