With the economy being as uncertain as it is today, it’s no wonder that a lot of business owners are looking for ways to improve cash flow for their companies.
Here are a few tips that you can use to manage and track the money that flows in and out of your business:
1. Factoring Invoices
Invoice factoring is an innovative, business-friendly alternative to traditional bank-backed financing methods. It gives your small business immediate access to the working capital you require, without debt to pay or any other strings attached.
Take a look at the following factoring benefits:
- Save Time And Money: When you’re factoring invoices, a private factoring company purchases your pending invoices, or invoices that haven’t been paid yet by your customers. The factoring company pays a percentage of the total receivable amount, and takes on the burden of collecting payment from your customers. This saves your business significant time and money that you would’ve spent tracking and collecting payments for these invoices.
- Alternative To Traditional Funding: Invoice factoring can also be used as an alternative to commercial real estate loans and equity loans for small businesses. However, remember that invoice factoring is not suitable for all types of businesses and is only suitable for companies that have stable cash flow and are not likely to experience substantial losses.
- Address Immediate Cashflow Problems: Factoring can also be used in cases where your business is experiencing a cash flow problem due to reduced sales. In some cases, your business may not have the cash on hand to meet short-term expenses on short notice. When this happens, factoring invoices will help keep your business afloat until your cash flow improves. Factoring is a great short-term option and is ideal for businesses that need additional funding in a hurry.
- Obtain Financing From Multiple Sources: With factoring there are no hassles or limitations when it comes to credit scores or your ability to obtain personal credit from a variety of sources.
2. Liquidity Management
What is liquidity management and its advantages in cashflow management? In cashflow management, the objective of a company is to have an orderly process for accessing cash. Cash flow management has three main goals – it helps with risk management, reduces financial risk, and increases productivity and overall profit.
The benefits of liquidation management include obtaining cash through liquidation. Common strategies involve:
- Disposing of assets
- Buying assets that will not increase the amount of cash available to pay off debt
- Selling assets
- Liquidating accounts receivable
- Liquidating accounts payable
Just remember that liquidation can also include a combination of any combination of these activities.
3. Forecasting
When it comes to the use of a forecasting system for your business, one of the most important factors will be the impact this has on your business cashflow. How you handle the forecast and its accuracy will greatly affect the direction your business will take in the future. This can be a very important factor in business planning and shouldn’t be overlooked, especially if you’ve already experienced managing a failing business.
Forecasting should be an important part of your business plan. Here are some of the reasons why:
- It gives you an idea of where your business is heading in relation to your competitors, which can be vital when it comes to improving your own business performance.
- It also allows you to see if you’re able to take on new projects and grow, as well as see what your competition is doing so you can learn from their experience.
- Forecasting allows you to see what improvements can be made to the way you work. For example, if your business is experiencing difficulty in meeting projections, then this can have a major impact on how the business runs, the decisions you make, and how you set up your cashflow. How you address forecasts will also affect how much money you make and how many customers you have.
Forecasts can be used to make changes to them to your cashflow management plan and improve your business. For example, if the forecast doesn’t show exactly what you expect it to do, then you can make changes to how you spend your money, or even make changes to the plans that you have in place.
4. Use A Real-Time Cost Control System
Essentially, a real-time financial management system allows you to track financial activity in real time. If you this system to keep track of your cash flow, you’ll know right away when you’ve spent too much and when you’ve spent too little. Tracking your money allows you to make adjustments accordingly.
5. Debt Management
Debt management plays a vital role in cashflow management. By paying your business credit card and loans on time, you can avoid accumulating unmanageable debt, prevent getting a bad reputation with lenders, and build a good credit history for your business
If you manage to pay off your business debts on time, your creditors will appreciate you more. This is because they know that you’ve managed your debts well. They won’t see you as a high-risk borrower, and they’re more likely to offer favorable terms and rates if you plan of securing financing in the future.
Another crucial step to debt management is to set up a budget to determine where your money is going. By creating a budget that works for your circumstances, you’ll be able to better manage your business cash flow.
Conclusion
There are many ways to improve the cash flow of your business. You can use invoice factoring and sell your unpaid invoices with it to avoid getting into debt while you’re short on the funds needed to keep your business going. You should also ensure proper cash flow and liquidity management to ensure that you’re generating high levels of profit and avoid the risks associated with unsecured borrowing.
If you’ve already obtained financing from banks or other lenders to keep your business afloat, make sure that you carefully monitor your repayment. Always make sure that your payments are on time to avoid getting a bad rep with lenders. More importantly, make sure that you do proper planning and forecasting to avoid cash flow problems in the future.