Your ability to properly manage cash in your business is a reflection of how stable your company is. Cash flow is the lifeblood of any business; it is an important means for you to keep the organization running. You use it to pay salaries, buy supplies from vendors, and build infrastructure. Startup companies that do not have the ability to properly handle their cash flow and reserves are almost certain to fail, while those with the know-how have a better chance of succeeding.
Boosting your cash flow involves quickly converting sales into cash while finding ways to reduce or extend payments, which are the basic foundations for long-term, sustainable growth of your company.
Here are a few suggestions to help you manage your cash efficiently.
Keep accurate, timely accounting records
You know how important it is for you to have a solid understanding of your business’s financial standing, and keeping timely accounting records is the first step. Having the latest statements on hand will let you know in advance if there are shortages in your cash flow, which will in turn give you adequate time to make the necessary preparations. You then have the ability to anticipate needs and act in a timely manner before you lose any more cash.
Establish a bi-monthly cycle for your payroll account
Set up a separate payroll account, and put it in a bi-monthly cycle instead of a bi-weekly cycle. A bi-monthly payroll system requires only 24 cycles as opposed to the 26 cycles that a bi-weekly system has. Having less cycles means that there’s less administrative costs allotted for collecting, verifying, and tabulating payroll information. Additionally, you might want to instruct your employees to take direct deposits to eliminate the cost of writing and delivering checks.
Set up a policy for delinquent payers
For small businesses, the ideal scenario is to collect payment before or immediately after a client purchases an item. But this is not always the case, especially if payment policies were not clearly communicated with customers. To avoid payment delays, set expectations from the outset by putting a notation that says, “payment is expected on invoice receipt.” Make it clear that waiting longer than 30 days to receive payment will have a corresponding interest charge. Provide potential delinquent payers with alternative payment options like credit card payments or specific payment plans.
Consider outsourcing key functions to experts
If you don’t have the inclination nor the patience to keep timely records of your cash flow or to manage your cash personally, outsourcing these functions to professionals is a great option for you. This way, you can focus on making decisions for your business or handling other functions that you are more adept at. You can also get expert advice and leverage on their experience in the industry. These are valuable insights that you can get, especially in specialized areas like taxation or bookkeeping.
Following these basic tips for efficiently handling cash provides you with better opportunities and more flexibility while giving you the peace of mind of knowing that you’re on top of your company’s money affairs.
Originally published at www.infinitaccounting.com.