Cash flow is considered the lifeblood of every small business and how it is managed can mean the difference between your company’s succeeding or not. Having ample cash on hand will ensure that your suppliers, employees and other vendors are always paid on time. It also allows companies to invest cash back into the business in order to generate additional revenue and improve their bottom line. On the other hand a lack of adequate cash flow can result in increased debt, late payments, high interest charges, and other struggles that will detract from your company’s overall success.
Even small businesses can have enough cash flowing in and out to require a professional and comprehensive system for managing it. It should be a software program that does the formatting, organization, and calculations for you, so your time is simply spent on analyzing and using the information to your advantage.
One option is to invest in an online billing application that has integrated accounting capabilities. It will give you the ability to easily enter all invoices and payables, track your cash flow, monitor inventory, generate necessary reports, and manage your client’s information all from the same website.
If you use an online billing software, make it a priority to run a weekly cash flow statement. There are so many necessary expenses needed to run your business, as well as the money you earn from your hard work. These transactions need to be reviewed regularly to ensure that you have enough coming in to cover what is already slated to go out. This is commonly referred to as cash flow management.
You cannot practice cash flow management, if you do not have an up-to-date cash flow statement. Cash flow refers to the difference between inflows (the actual cash that is coming) and outflows (the cash that is scheduled to come out). The actual income is not accounted for until payment is received. On the same hand, expenses are not calculated until payment is made. Looking at a bank statement will not show what is scheduled to come out and what you are hoping will be coming in. It needs to be a professional and current cash flow statement.
Assessing accurate cash flow projections at least once a week is one of the most important things a small business owner can do to ensure their success. It can raise red flags to potential problems before they grow too big to handle, reduce the reliance on credit, and indicate if a receivable is past due. It is crucial that other factors are also accounted for in your cash flow analysis, including upcoming expenses like rent, inventory, salaries, benefits, taxes, office supplies, and advertising expenses. If you use an web-based online billing to manage your accounting, it can plug in reoccurring expenses for you, so everything is considered.
Cash flow management is not fun, but it doesn’t need to be difficult. It is a fundamental aspect of all businesses and it needs to be watched closely and managed. If you are still struggling, look into an online billing application to make managing your cash flow simple and convenient.