Cash flow is an essential part of any successful business. Healthy cash flow enables an organisation to carry out their daily tasks and make payments that are integral to running a business. For investors, cash flow can also reflect a company’s financial health since typically the more cash that is available for business operations, the better. If you are looking for some ways to improve your business’ financial systems, you’ve come to the right place. Today, we look at some incredibly simple ways a business owner can improve his or her company’s cash flow, so read on to find out more!
1. Embrace Technology
One of the best and most underrated ways of improving cash flow is to embrace technology. This means looking into accounting software in Australia that will assist you in managing your business finances a lot more efficiently and effectively. Software enables you to keep track of your finances, expenditure and monitor how much cash you have left. Manually handling these calculations can be time-consuming and subject to human error, but leaving it to software to handle the hard stuff can prove to be incredibly beneficial to healthy cash flow.
2. Cut Down On Costs
Do you feel like your business is spending a little too much on superficial costs such as stocking the pantry or paying for office supplies? One of the easiest ways to improve your business’ financial systems is to identify where your money is being spent unnecessarily. Whilst we don’t expect you to stop offering coffee at the office, one can always look towards cheaper alternatives. When it comes to office supplies, consider purchasing from a bulk supplier instead of an ordinary stationery shop. You can also cut down on expenses by going green and switching to eco-friendly options that often cost less and offer you the same benefits. Refurbished computers and electronics often cost a lot less than brand new, but still, offer you exactly the same product at a discounted price. Little costs add up, so being a little more frugal and wiser in your purchasing decisions goes a long way.
3. Have A Handsome Cash Reserve
Most business owners will tell you how important a cash reserve is. Similar to having a personal savings account for a rainy day, a cash reserve serves as an insurance policy when tough times hit. Should you encounter any unexpected costs or simply be running out of cash, your cash reserve will come to the rescue. Typically, businesses try to maintain a cash reserve that adds up to about 3-6 months of company expenses, whilst constantly topping it up where possible. Cash reserves can also help you sustain your business should you have clients who pay you late or if you have a temporary downturn in revenue. Every successful business has a decent cash reserve, so start setting money aside if you haven’t already done so!
4. Liquidate Assets
Do you have assets lying around that are no longer of use or obsolete? This is the perfect chance for you to liquidate those assets and invest that money into your company’s cash flow. Non-working equipment takes up precious office space which could be used more productively and sits there depreciating more with each day that passes. Excess inventory can also quickly become obsolete due to changing customer preferences, so consider selling inventory that has been hanging around for too long.
5. Bill On An Immediate Basis
Last but not least, consider billing on a more immediate basis. Common sense says the faster you bill, the faster you get paid. Whilst it is not uncommon for businesses to bill at the end of the month, you also subject yourself to late payments which then affect your monthly cash flow. If you’re having issues with cash flow, you may want to consider accelerating your billing process and sending out invoices the second a job is complete. This increases your rate of faster payments and assists you in keeping on top of your business’ financial systems.
We hope that this article has given you some simple ideas as to how you can go about improving your business’ financial systems. Keeping on top of your cash flow is vital in maintaining the financial health of your business, and with these simple tips, we’re sure you’ll have a healthy cash flow for a long time to come!