Cash Flow: Manage Your Cash Flow Effectively
Good
cash flow management is at the heart of most successful businesses. By the
same token, cash flow problems caused by a time lag between when you pay
your suppliers and when you receive money from your customers, is at the
root of many companies’ failures. This article discusses some key cash
flow management techniques to help you stay in the black.
Cash
Flow Projections
Preparing accurate cash flow projections can alert you to problems before
they actually materialize.
Cash
flow projections are educated estimates that incorporate your customers’
payment histories and how long your suppliers are prepared to wait to get
paid.
Begin
your cash flow projections by adding cash on hand at the start of the
period with cash you expect to receive in. Then note the amounts and dates
when you will have to outlay cash. Cash flow projections should at least
cover the following year and possibly also the following quarter.
Preparing cash flow projections is an essential aspect of cash flow
management.
Improving Receivables
Another
way that you can manage your cash flow is by improving your receivables.
In other words, increase the speed with which you turn supplies into
product; inventory into receivables and receivables into cash. You can do
this in a number of ways such as by; carrying out credit checks on new
customers and by following up late payments.
Managing
Expenses
Controlling your expenses is another way to manage your company’s cash
flow. One way you can do this is by only making payments on the day they
are actually due, not before.
Managing
Shortfalls
Most
businesses experience cash shortfalls at one time or another. The trick is
to be aware of the shortfall as early on as possible. Banks are very
nervous about lending money to people and companies who say they need
money straight away. They much prefer to be given notice that you will
want to borrow.
One way
to manage cash shortfalls is to realize that your company is going to
experience them at some time and to therefore arrange a line of credit at
your bank. This will enable you to borrow money when you need it.
Alternatively, you could ask suppliers for extended payment terms or ask
your best customers to speed up payments.
Victoria
Selman
More Details at:
http://www.onstop.co.uk/improving-managing-cashflow.htm
