Any business owner who doesn’t have a good grasp on their finances is likely not to be a business owner for long. Money is your lifeblood, and even when you’re selling well, if you’re not keeping a close eye on your cash flow, you can quickly find yourself running out of the funds to sustain yourself in the long run. For that reason, we’re looking at the cash flow hacks that can ensure that you’re always in the black.
Start Forecasting Weekly
Monthly forecasts might be the traditional option, but, especially in the fast-paced digital business world, a monthly review might prove too late to enact meaningful change. With the right digital accounting tools, you can start reviewing your costs and income forecasts each week, helping you spot gaps in your budget, adjust your spending, and chase invoices before your reserves start to run dry.
Speed Up Your Recievables
If your cash flow is starting to show some lag, then you should have strategies to get the payments that you’re owed. Having an invoice system with reminders and including late payment penalties can help. However, if you want people to pay even sooner, then early payment discounts, even as little as 2% off, for paying in a shorter time period can be the carrot in contrast to your stick. The faster cash comes in, the more freedom you have to manage your operations and costs.
Consider Open Banking To Improve Visibility
While it may traditionally be an option used by individuals, open banking could have serious benefits for businesses, too. Comparing open banking vs BaaS (another common option), you get more direct control and access to bank data across multiple accounts and platforms. You can more easily see your true cash position at a glance, as well as triggering automated alerts for when your balance hits a certain amount or if there’s any unusual activity. Open banking also typically has lower transaction fees thanks to direct bank-to-bank payments.
Negotiate With Your Vendors
Whatever flexibility you can get over your accounts owed, you should exercise. A lot of vendors might be willing to change payment terms if you ask. This can include negotiating payment plans instead of paying all invoices upfront, as well as annual instead of monthly plans to take advantage of their significant discounts.
Keep Operating Cash And Growth Capital Separate
If you want to grow your business and keep improving your products and services, then you need to build up your reserves of growth capital. However, a lot of business owners make the mistake of keeping this growth funding in the same account as the operating cash they use for their salaries, rent, and inventory costs. By separating them into different accounts, you can have a lot more strategic clarity, and helps you see precisely how much of each you have.
With the tips and tricks above, you should hopefully have an understanding of how to manage your cash flow better, helping you create a business that’s a lot less vulnerable to sudden costs or shocks.
Cash Flow Hacks You Should Know As A Business Owner