Cashflow

6 WAYS TO MANAGE YOUR BUSINESS'S CASH FLOWS
It won't be an exaggeration to suggest that cash flow is the bloodline of a business.

Surely, cash flow is an indicator of a business's better performance, if not success.
Cashflow management can be a bit challenging, yet crucial for business performance
and its success. For cash flow, certain prerequisites are highly pertinent for its success,
such as; cash flow management skills. Every business, irrespective of its size, needs
cash flow for the continuation of its operational activities. One of the main causes of
business failure, it's suggested, is poor cash flow management. Cash flow has become
a never-ending problem for 3 out of five business owners, according to a recent survey.
Cash flow is pertinent for business regardless of its size, however, it’s been witnessed
that small businesses are more susceptible to it. Around 60% of small business owners
claim that cash flow has been a problem for their business and 89% of them suggesting
these problems have hurt their business. Undoubtedly, cash flow management is a bit
tricky, yet with a few simple steps, one can smoothly overcome this challenge.
Creating cash flow forecast
An accurate cash flow projection could aid in notifying forthcoming challenges and
shortcomings before they actually arise. The primary factor businesses have to consider
before creating a cash flow forecast is the period for which they want to create a
forecast. Most businesses construct cash flow forecasts for a month, this is largely due
to the fact that it’s not only easily made but also, it’s more reliable. The most important,
if not only, thing you must factor in the cash flow forecast is predicting your sales. To
forecast your sales, look at last year's figures to see if you can spot any trends.
However, if new to the business, start by estimating all the cash outflows. This will give
an idea of how much money is needed to cover the cash flow imbalance.
Ensure effective Inventory management
Effective inventory management is vital. Perhaps every business understands its

relevance. It’s completely absurd to tie a large pile of cash to inventories. Due to this,
there is likely to be a waste of resources, as this has an opportunity cost. The money
tied up in inventory could well be used for other productive purposes. Thereby, if there’s
ineffective management, it’s going to have a trickle-down effect on the whole
organization, leading to its eventual collapse. In order to prevent this from happening,
many businesses resort to certain inventory management strategies, including; Just-in-
time. This means that inventory is to be ordered only when it’s needed. This
substantially reduces business costs, leading to a better cash flow position.
Carefully control credit policy
It’s highly necessary for a business to devise an effective credit policy and strictly
control it. It’s widely witnessed that businesses fail to get their money back because
they have a lenient and ineffective credit policy. Selling goods and services on credit
allows a business to apply certain incentive strategies to help them in getting their
money back promptly. These include; offering discounts on timely payment and putting
penalties, should the credit time exceed. This is not it; the business also has to stick to
its credit policy and any variance to it would give an impression of non-seriousness to
stakeholders, leading to further cash flow and managerial problems.
Extend Payables
Strategically paying the cash is imperatively relevant to effectively managing cash flows.
Extend payables as long as possible and spread them. It’s not strategically sound to
pay all your bills at once. Not only it’s illogical but also attracts demonizing dangers to
yours, pushing your business into a probable working capital crisis. Keep a friendly line
with suppliers and lenders, as it may help you negotiate better payment terms.
Leasing equipment
Leasing equipment could allow a business to reduce its upfront cost. In the long run, it
allows businesses to avoid getting stuck with obsolete equipment. According to a U.S.
Equipment Finance Market Study for 2016, 39% of businesses that acquired new
equipment leased it compared to 17% in 2012. The trend toward leasing is growing
rapidly and rightly so because it has innumerable benefits that improve business cash
flow along with its efficiency.
Use technology to make and accept payments
Accept online payments to collect receivables faster and use electronic funds transfers
to automatically and instantly pay bills. Technology may also assist to keep track of
where the business stand.
Positive cash flow is critically important to short and long-term financial success. Make
the most of the cash by monitoring expenses, collecting payments quickly, and using
the resources that can make cash flow management more convenient
Final words
There should be no doubt whatsoever that cash flow management is imperative to an

organization’s success, however, it’s not the only determining factor in business
success. There are other factors, which if overlooked can be apocalyptic for business
operational abilities, and the success of cash flow forecasts also demands certain
conditions, one of them being; access to accurate data. Therefore, no matter how many
cash flow forecasts are made they are doomed to fail. Businesses should ensure an all-
round performance, one slightest mistake in managing cash flow can invite problems
that may have severe repercussions for business.

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6 WAYS TO MANAGE YOUR BUSINESS'S CASH FLOWS

It won't be an exaggeration to suggest that cash flow is the bloodline of a business.

Creating cash flow forecast

Ensure effective Inventory management

Effective inventory management is vital. Perhaps every business understands its

Carefully control credit policy

Use technology to make and accept payments

There should be no doubt whatsoever that cash flow management is imperative to an

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