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Set Cash Flow Targets
The most practical first step in managing cash flow in a business would be to set cash flow targets and prepare a cash flow forecast. This would depend on what money you will be spending and what payments would be coming in for the next 6 months to begin with. This way you will be giving your credit controllers a good financial outlook of your business as well as gaining satisfaction that you are giving this crucial area of your business the attention it deserves.
Establish Payment Terms
Customer payments are virtually the lifeblood and most important source of the cash flow in business. Once payment terms have been established, you need to ensure that the customer payment process is made as easy as possible. It is better to offer customers payment options that bring in cash in a timely manner and are more suitable to your business. Discourage check payments and prefer online payments, which will always ensure a good cash flow. Moreover, having set the terms, knowing when your payments are overdue will allow you to manage a better cash flow situation.
Invoice in time
Sending out invoices to your customers is something that is very much in your control. So make it a point to send invoices as soon as possible after you have completed the work. If you delay sending the invoice for a week or so, you can expect payment to arrive in your bank after a minimum period of three weeks. Sending invoices by email is another good option which takes much less time. It elicits quick response and helps in keeping the cash flowing in.
Spend with discipline
There’s no room for impulse buying in an organization that needs to control its cash flow. The procedures or purchase in the organization have to clearly spelled out and inventory should be managed with an eagle eye. Is the item really essential for your business, is there a less expensive way of managing. Have you shopped around and made inquiries? This exercise of discipline is necessary if you are to keep expenditure under control and not block up cash flow. You need to understand when to invest and when to save.
To be in good control of your cash flow in business , you need to monitor it regularly. Inaccuracy and missing out data can be catastrophic to your small business. Set targets, establish payments and make forecasts which will help you to have cash in hand at any point of time. Stick to budgets and invest wisely, you will never find your business wobbling.
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