It is no secret that insufficient and poorly managed cash flow can cripple even the most profitable businesses. According to a new study from Wakefield Research, commissioned by Intuit Australia, small businesses in Australia have lost opportunities worth $5.8 billion due to inadequate cash flow. It is essential to take control of your cash flow to keep your business going even during a turbulent phase.
What is Cash Flow?
In simple terms, cash flow is revenue versus expenses. If you have more money flowing in than going out, it means you are making a profit.
If your business expenditure exceeds the revenues, it means you need to take control of your cash flow.
How to Take Control of Cash Flow?
Here are a few actionable tips that will help you control negative cash flow:
- Proactive Business Strategy – Create a clear outline of your business goals, along with you describing ways how will you achieve them. Besides, you can document the speculated income and expense to gauge how this will affect your cash flow.
- Monthly Sales Projections– Create a monthly sales forecast that is based on real numbers, facts and market trends. Moreover, you can evaluate your competitors in the industry to monitor the trends and speculate future sales.
- Monthly Cash Flow Budget– You can prepare a monthly budget to control day-to-day cash flow. Make sure you have included everything right from monthly inflow, opening, and closing balances to have a panoramic view.
- Get Hold of Unpaid Invoices– Take charge and become proactive to chase down every unpaid invoice. Encourage your customers by offering discounts to make early payments.
- Keep a Cash Buffer – You can safeguard your business from unpredictable bumps by saving “just in case” cash buffer. It’s recommended to set aside an amount that equals to two months of operating expenses.
- Have a Crystal Clear Policy – Implementing a thorough cash management policy would help you on the front foot. Have a clear outline of the permitted limit for business expenses.
These simple tips will help you manage the cash flow better and ensure you are not out of funds when a profitable opportunity comes knocking on your door.
Get insights and advice from specialists at Bayside Business Accountants to bridge the cash flow gaps.