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Managing your cash flow is one of the most important duties you’ll have to perform as a business owner. Whether you’re selling goods or services, staying on top of the money that’s coming in and going out of your operation is vital to your short and long-term success. If you’ve experienced a lot of growth lately, and you feel that your grip on your cash flow is slipping, here are some tips to get it under control.
Have Clear Payment Terms and An Invoicing System
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This is a very simple part of good cash flow management, and yet countless entrepreneurs manage to neglect it. It’s simple: send your invoice promptly, and you’ll get paid promptly. A key factor in making sure your cash flow is streamlined is having clear payment terms. A lot of B2B clients will put off payments, and see how far they can push the company they’re buying from. If you want to be paid more promptly, I recommend setting your payment terms at around 13 days or fewer.
Have a Long-Term Financial Plan
You may have a pretty strong handle on your business’s current cash flow, but what about the long-term? If you don’t have a clear view of the kinds of expenses that are on the horizon, and the best way for you to cover them, trying to control your cash flow can quickly become overwhelming. At any given time, you should have a clear plan for the short and long-term future, covering the money you’ll set aside for expenses, what you’ll use to grow your business, and other investments that will support your existing income. There are ways to simplify some of these, for example you could use binary robots to invest for you rather than hiring an in-house manager. Whichever way you approach it, you should always be thinking three steps ahead.
Handle Debt Carefully
“Debt” is a universally bad word for anyone who only has to worry about their personal finances. However, when it comes to business, debt is just another inconvenient truth you’ll need to deal with. Taking out a loan can be a great way to cover start-up funding, a new office, capital equipment and so on. The key factor here is researching your options, and choosing the one that will garner the greatest ROI. Controlling your debt is essential to good cash flow management.
Review Your Costs
In order to keep your cash flow as stable as possible, you need to be reviewing and revisiting all your costs on a regular basis. Use accounting software or other resources to form reports on your business’s profit and loss, payable and receivable, balance sheets, inventory management, depreciation, and anything else that represents a recurring expense for your company. If you stay blind to where your money is really going, it can be easy to get stuck into a routine which could be draining your hard-earned capital. Talk to a trusted financial advisor, ask them to have a look at your expenses, and perform a thorough review once a month.
