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>> How To Manage Your Cash Flow Effectively
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How To Manage Your Cash Flow Effectively
By Victoria Selman
Good cash flow management is at the heart of most successful businesses. By the same token, cash flow problems caused by a time lag between when you pay your suppliers and when you receive money from your customers, is at the root of many companies’ failures.
This article discusses some key cash flow management techniques to help you stay in the black.
Cash Flow Projections:
Preparing accurate cash flow projections can alert you to problems before they actually materialize. Cash flow projections are educated estimates that incorporate your customers’ payment histories and how long your suppliers are prepared to wait to get paid.
Begin your cash flow projections by adding cash on hand at the start of the period with cash you expect to receive in. Then note the amounts and dates when you will have to outlay cash.
Cash flow projections should at least cover the following year and possibly also the following quarter.
Preparing cash flow projections is an essential aspect of cash flow management.
Improving Receivables
Another way that you can manage your cash flow is by improving your receivables. In other words, increase the speed with which you turn supplies into product; inventory into receivables and receivables into cash. You can do this in a number of ways such as by; carrying out credit checks on new customers and by following up late payments.
Managing Expenses
Controlling your expenses is another way to manage your company’s cash flow. One way you can do this is by only making payments on the day they are actually due, not before.
Managing Shortfalls
Most businesses experience cash shortfalls at one time or another. The trick is to be aware of the shortfall as early on as possible. Banks are very nervous about lending money to people and companies who say they need money straight away. They much prefer to be given notice that you will want to borrow.
One way to manage cash shortfalls is to realize that your company is going to experience them at some time and to therefore arrange a line of credit at your bank. This will enable you to borrow money when you need it.
Alternatively, you could ask suppliers for extended payment terms or ask your best customers to speed up payments.
About the Author:
On Stop‘s Managing Cashflow Programme (http://www.onstop.co.uk/improving-managing-cashflow.htm) is designed to accelerate payment and alert members to customers with bad payment histories.
Source: www.isnare.com
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