Are you feeling that your cash flow is a little under the weather? Try out these effective ways to solve cash flow problems like a pro!
Cash is the soul of your business. Whether your business is successful or going through a struggling phase, setting up a proper money management strategy is absolutely essential. Statistics show that over 60% of new companies collapse due to cash flow problems. Many big businesses have reached bankruptcy because they couldn’t keep track of the cash coming in or going out. As a new business owner, it is essential for you to tackle your business’s cash flow problems. Exercising good cash management in your company will allow you to make smart investments and stay in business even during volatile times. Here, you will find a complete guide to solving all your cash flow problems. Please keep on reading to discover some fantastic strategies that can help you keep your cash flow pumping.
1. Set Up a Complete Money Management Plan
Managing your day-to-day finances is a key to enhancing your cash flow. From debts to bills to insurance, it is tough to keep track of everything. Especially for new business owners, managing all that cash flow is no less than a nightmare. What you need to prevent any kind of cash flow crisis is an effective money management plan. Here are a few steps you can take to manage finances in your company:
- Sit down with your bills to figure out how much you are spending on rent, mortgage, etc.
- Create a debt settlement
- Call a meeting with your debtors and arrange monthly payments or settlements for your debts.
- Once you figure out your bills and plan for your debts, you can formulate an ideal budget for your company. Setting up a monthly or yearly budget will help you manage your finances more efficiently.
- Find an investment plan that suits you and invest in it.
- Keep track of your net worth. Here’s how you can do it: add all your properties, assets, and cash and calculate its value.
2. Put Things on Autopilot
Automating different operations of your business is an intelligent way to stay afloat in this competitive business world. There are countless Artificial Intelligence technologies out there that can help you automate various business operations, including cash flow management, financing, data handling, etc. AI technologies are not only work-efficient, but they also tend to deliver more accurate results. As a new business owner, you will need to automate at least some of your business’s operations. In order to lessen your burdens and ensure that your cash flow is managed correctly, you must introduce your company to a forward-thinking cash flow management plan. Adapting to change is the only way you can drive your business towards growth, and automating is definitely the way to it.
3. Bring in a Professional
If you are a new entrepreneur, there is a fat chance you are trying to tackle everything alone. Sometimes, the responsibilities of a new business overwhelm you, and you find yourself stuck in an endless loop of work, work, and only work. Honestly, you don’t have to handle everything by yourself—even if you are the sole owner of your business. Bring in a professional who can help you with cash flow management tasks, especially if you lack expertise in this area. Seeking out a professional will allow you to have a more productive time. You can focus on adding value to your business and making it more creative. Plus, you wouldn’t have to do all the boring stuff. There are firms providing accounting services everywhere in the world. You can easily find one that suits you. Outsourcing accounting tasks to a professional is a fuss-free option for your business. Just hire a professional, and get your accounts managed in a proficient way.
4. Create an Account for Buffer Money
When you are initiating a new business, there are a lot of risks involved. Anything could go wrong, leaving your business bankrupt. And just as we mentioned above, there is a high chance your business can fail due to cash flow problems. So, how do you prepare for the risks? Well, risk management is another wide topic. Still, the first thing you must do is ensure that your company has enough buffer money to fulfill all the capital needs. In case of any cash flow crisis, you need to have buffer money for your business. It is advised to save at least 4 months’ worth of outgoing cash for volatile days. Whether the money is coming from personal funds or a revolving credit facility, having a buffer of some sort is always beneficial. So, to survive the rainy days, make sure to prepare ahead of time.
5. Collect Your Accounts Receivable
This tip sounds very simple, but faster payments have profound effects on your business’s cash flow. Here are some things you can do to collect your accounts receivable faster:
- Prepare invoices and send them earlier
- Break payments into weekly or bi-weekly segments
- Arrange multi payments methods
- Ask for partial upfront advance payments
- Urge past due accounts to pay
- Appreciate early settlements by giving discounts
To prevent your business from falling into any cash flow crisis, it’s good to collect your debts faster. If you have a lot of unsettled debts, you can settle them through invoice factoring. In invoice factoring, the factoring company settles only a set percentage of their debt. This way, you get cash faster while the factory company is bound to pay your client’s debts.
Once you get into a cash flow crisis, getting out of it can be challenging. But let us assure you that bouncing back to a positive cash flow is totally possible. You just need your wits and some effective tactics to snap out of this phase. Let Mi2U Business Support make the right strategies for you and keep both your thoughts and your cash flow positive!