One of the biggest issues facing small business is poor cash flow, add in the disruption of a pandemic and it has become even more important for businesses to ensure they have sufficient cash coming into their business.

When business owners are managing their cash flow it is important for them to track upcoming expenses, while comparing them to their accounts receivable as well as projected sales.

It’s not enough for businesses to have strong sales, they need to ensure collection of those sales to maintain a healthy cash flow.

Below are some tips for managing your cash flow and getting your invoices paid faster:

  • Ensure your accounts are up to date – when your accounts are up to date you’ll be able to see the financial state of your business at a glance.
  • Reduce the amount of risk you take on with customers – don’t be too lenient with your customers, if your accounts receivable are trending upwards they can become harder to collect.
  • Keep your accounting simple – if you’re not confident with your numbers, contact Holden Accountants we’ll be able to assist getting your business onto the right software to ensure you can keep track of your business.
  • Cash reserve – it’s not always easy but once you’re able to build up a cash reserve it will act like a cushion when managing unexpected events.

Projecting Cash flow

A large part of any cash flow process is determining when you’ll receive and need to spend money. Reflecting on prior year’s numbers to create a base for your cash flow for the following year. This will allow you to identify if your business has high and low seasons and where you are likely to incur recurring expenses.

Once the cash flow base is determined, you’ll then be able adjust for anticipated changes such as new pricing, employee increases, funding sources and months with higher expenses.

As the year progresses your cash flow should be updated to include any changes in projections and reflect any developments in revenue or expenses. Your cash flow shouldn’t remain stagnant, it should be reviewed and updated regularly to allow you to monitor your businesses cash flow at any given time.

If you’d like additional assistance working through possible cash flow impacts, we at Holden Accountants would appreciate the opportunity to assist.