Tips for creating a process to remain cash positive during poor economic conditions.
While it’s true that many business owners would love to shorten the cash cycle for their business (while remaining cash positive) it’s also true that many don’t know how.
By creating a continuous process of timing, using information, and keeping cash positive in your business, this act can help keep you in the black even during an economic recession.
Of course, you still need to plan and forecast appropriately while staying in touch with suppliers/partners, but that is what having an integrated strategy for cash flow management is all about.
First, it’s important to note that profit is not the same as cash flow. While looking at your P&L statement can give you a quick insight, you also have to compare other financial figures that factor into your cash flow including accounts receivable, inventory, accounts payable, capital expenditures, and debt.
Cash flow management software like Dryrun actually integrates with your cloud-based accounting software and can help create a comparison to evaluate your cash flow situation (using all these statements) in real-time.
But smart cash flow management also considers each of these financial statements and how they can be optimized for your business specifically.
How can I improve my cash flow?
There are easy steps you can take right away to improve your cash flow relatively quickly. Part of this includes building a process for cash flow management in order to control and predict future flows as best as you can. By planning for growth and related cash expenses, future investments will not come as a surprise and you’ll have a better idea of what’s available to reinvest in the business.
Other methods to include in your cash flow management process are:
- Tracking and collecting accounts receivables
- Emailing monthly statements to all your customers
- Sending automatic invoice reminders to particular customers
- Accepting credit card payments from some of your customers
- Creating tighter credit requirements
- Increasing sales
- Offering discounts where it makes sense
- Securing loans, you know you’ll be able to pay back
By incorporating these strategies in your cash flow process, you’ll likely remain in the black a lot longer than your competitors or other businesses not presently focused on their cash flow strategy.
Collecting receivables that are overdue or upcoming is a fast way to collect cash owed to your business. This is something that should be monitored daily in order to optimize the flow, but you can speed it up by using accounting software that automatically invoices/sends reminders and