The latest guide in our Business High Five series, The SME Guide to Cash Flow Management offers practical guidance on building and maintaining a healthy cash flow.
Some of the important questions our guide answers include:
The Importance of Cash Flow Management
Cash Flow Management is the process of monitoring, analysing, and optimizing the net amount of cash receipts minus the cash expenses. As a business owner, understanding your cash flow gives you clarity over your monthly cash needs, and can also help identify the sources from where these can be met.
The three main areas we’ll cover are:
- What cash flow management involves
- The benefits of cash flow management
- Documents you’ll need when analyzing your business cash flow
7 Ways to Manage your Business’s Cash Flow
Having an effective cash flow system is the heartbeat of any successful business. This is especially true in a business where managing cash flow between different projects can mean the difference between success and failure of your business.
We’ve put together a few tips and tricks that could help you manage your cash flow to ensure your business remains profitable across all projects.
- Understand your customer
- Do a cash flow forecast
- Be realistic about your profitable estimate
- Negotiate contract terms in your favour
- Always check Change Orders
- Be strict about collecting payments
- Close the project
8 Cost-reduction Strategies for Better Cash Flow
As a business owner, you’re always looking for ways to reduce costs. Of course, cutting costs helps you boost your cash flow. And when you’re running a business, you know cash flow matters. Business owners regularly tell us a steady cash flow means their businesses can thrive. Negative cash flow, on the other hand, causes missed opportunities and immense personal stress.
Related: The SME Guide to Business Funding
Forecasting in Uncertain Times
It’s easy to get stuck in a loop of short-term thinking when you’re dealing with sudden, unexpected, even – dare we say it? – unprecedented events. But forward planning is key because it helps you adapt more quickly as the situation evolves so you come out the other side in a stronger position.
Of course, forecasting in the midst of great economic uncertainty can feel like trying to hit a moving target. This is why it’s a good idea to plan for a number of different scenarios.