Managing your cash flow is essential in the success of your business those who neglect this aspect may find themselves bankrupt. A company that registers profit in their books doesn’t necessarily mean that they are doing well. Lag time in shipping and posting of payments may result to negative cash flow and future losses. Effective cash flow management is the key to make sure that your cash is flowing towards growth or expansion of your business.

cash flow

Effective cash flow management allows you to maintain enough funds to cover all expenses on time and still have enough left to invest for an upgrade or expansion. If your business is surviving on a day to day basis, incurring arrears, or lacking in profitability then you may want to look into your cash flow before the situation gets worse. Cash on hand, account receivables, interest earnings, and amount and dates of expenses are factors that you should consider in managing your cash flow. The objective is to make the most out of the earning potential of your cash and keep expenses at their minimum. This could be done by delaying cash outlays and speeding up payment collection from customers.

Pay your bills on the deadline itself unless your creditors offer you an incentive for paying early. You can use the funds for investment or to earn interest while it is in your hands thereby making the most out of your earnings. Take advantage of credit card perks for some of your business expenses like travel, representation, etc. Even if your credit card company doesn’t offer rewards, you can delay payment for around 45 days compared to paying in cash.

The other side of cash flow management is the collection of accounts receivables. As you delay payments to your creditors, you would also want to speed up payments from customers. This can be done by offering incentives like discounts or freebies for cash payments or having store policies like down payment upon ordering or strictly cash on delivery. You also need to watch out for lag time in shipping and posting as this may cost your business as well. Make sure that invoices are sent on the same day as the goods so you can also collect on time.

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