Six tips for managing cash flow
Cash flow is the lifeblood of every business. It is the fuel that keeps your business running, so you need to make sure you always have enough in the tank to get your business to where it needs to be. Managing cash flow is made a lot simpler by using online accounting software — but how? Here are six simple tips:
- Invoice immediately. Use your invoicing software to send an invoice as soon as the job is completed or the sale is made. The sooner you invoice, the sooner you will get paid. Most accounting software packages allow for invoices to be sent directly to the customer by email, so it is fast and effective. If you use software with mobile capabilities like MYOB OnTheGo, you can even invoice on the go from your smartphone or tablet.
- Know who owes. Using your software, run your aged debtor report regularly. Check who owes you what, and if there are outstanding payments due from your customers, follow up immediately. Keep in contact until the payment is made.
- Pay when due (not before). Don’t pay your suppliers until the payment is due. Terms provided by your suppliers are the same as an interest-free loan, which means you can use your cash for other areas of your business until you need to pay your suppliers. Your aged payables report in your accounting software will show you when payments to suppliers are due.
- Track your stock. Make sure you are managing your stock effectively. Your online accounting system can show you the amount of stock you are holding. If you are holding too much stock, this is cash sitting in storage doing nothing for your business.
- See how much cash you really need. Use the automatic bank feed to keep your financial records up to date. Most business managers know how much is in their bank account, but you also need to know how much you need to pay upcoming bills. By keeping your records current, this gives you the best idea of how much money you have to pay your bills.
- Get a complete overview. Look at your balance sheet at least monthly. The balance sheet shows you what you owe to the tax department, balances on bank loans, and other monies owed over the longer term. This will help you plan how much cash you need — and when — for the longer term and give you an overall picture of the financial health of your business.
The best way to manage your cash flow is to use your online accounting software to stay on top of all the components of your sales, from orders to stock purchases and invoicing. With more cash in the bank, you will have increased flexibility in your business. Making the best use of the cash you have means you can be less dependent on increasing revenue, and you can focus on being more efficient with the way you currently run your business.
For more information on online accounting that suits your business, see the MYOB range.