By: American Receivable
Accounts Receivable Factoring / Business Analysis / Cash Flow
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Cash flow is essential to any growing business. When cash flow slows down, it can cause the business to drop revenues or completely fail. In order to keep from failing, business owners have to look at their business practices and figure out what is causing the cash deficit. There are many possible reasons for the shortage of cash flow as well as simple ways to eliminate the problem.
New streams of revenue may be a possible answer. Can you diversify your business to include other services that would bring in regular cash flow? Adding the right services to your current business can help fill in the cash flow gaps.
Don’t overestimate when forecasting cash flow. Bee conservative and consider worst case scenarios when forecasting for the future. Planning ahead will help your business stay afloat and reduce risks in the event of an unexpected cash flow shortage. Consider prior years when forecasting your upcoming year. Late payments from customers or large unexpected business expenses can lead a business into a cash flow crisis.
Collecting from customers can be a constant struggle. Look at your current collection practices and look for ways to make them more efficient and effective. Implementing software that can flag overdue accounts and send reminders to customers should be utilized. Follow-up phone calls or emails may be required, however, the software will give you the assurance that reminders are being sent and your accounting division is aware of any problem accounts.
Evaluate the time management and resources of your employees. Are they using time effectively? Are your employees using resources too quickly that could be used more conservatively? Are they spending too much time in one area and too little time on something more crucial like collections or verifications? Efficiency in your business will be a helpful tool for cash flow management.
Business expenses and operating costs. Know how much revenue is being spent on office supplies and other expenses. Businesses often order supplies that are not really essential for daily operations that could be purchased on an as needed basis. Look at your supplies and order only what is necessary. A smart business owner will always be on top of revenue coming in and going out.
Cash flow is the most important asset for a business. Make sure your business is utilizing your cash effectively for growth and longevity.