How Can a Business Manage Cash Flow?

Cash flow is the ‘new black’ for 2020…but how do I manage it?

manage cash flow
Photo by Estee Janssens on Unsplash

Cash flow has a profound impact on the entire business. However, there’s still some confusion surrounding the concept and its practical application. Understanding how to manage cash flow goes hand-in-hand with business success, while ignoring it can lead to disastrous results.

How can a business manage cash flow? 

It is important to keep your eye on your financial statements and manage cash flow in order to stay in the black and have enough cash on hand to run your day-to-day business operations. Running into cash flow problems can easily derail a business almost instantly because people tend to stop working/providing services when there is no money coming in. 

At a high level, some tips for managing cash flow efficiently are: 

  • Keep enough cash in the bank to cover at least 3 months of business operations 
  • Control inventory to avoid tying up cash in stock that is not selling (practice inventory management and inventory forecasting)
  • Collect accounts receivable regularly and follow up on delinquent payments immediately to recover as much as possible 
  • Shorten credit payment terms and end unprofitable relationships as soon as possible 

Implementing just a few of these strategies can help recover a lot of money and improve your cash flow almost instantly.  For additional ideas, download our free report 105 Ways to Increase Cash Flow In Your Small Business.

Contact your accountant to set up regular generation of cash flow statements as a starting point to cash monitoring. Then create a plan that outlines steps to manage cash in your business.

Need help with your cash flow? 

Prosperity Bookkeeping is a partner with DryRun the world leader in Cash Flow Management software. We fully integrate with Accounting platforms and we provide consultative services so you can get up and running quickly. We are happy to chat with you! Visit our website for more details.