Why cash management is essential for your company
EC Credit Control care about your financial management of your business. Cash flow is to a business what blood is to the human body. Nothing can impact a business more dramatically than not being able to make payroll one Friday. In the Hawkes Bay we believe that proper cash-flow management begins on the first day you start your business—and it never stops. Good cash-flow managers review their cash position daily, looking at cash sources and needs for the next week, month, and quarter. This allows you to plan for any large cash needs before they become cash crises.
Below are some cash-flow tips that will help you as you build your business.
#1 – Skip the paycheck
If you are starting a business just for the security of a paycheck, well, then you’re in the wrong business. That’s how employees operate. Delay taking a salary until your business is generating cash flow from sales. In some cases, this may not be possible due to an extended development phase, but for most people it is possible. Also, if possible, keep your full-time job and start your business part time. By delaying taking a salary, you can reinvest sales to help grow your business.
#2 – Get your due
When you do business with others, you deserve to get paid. Plain and simple. Invoice your customers quickly upon shipment of goods or when services are provided. Require payment upfront until credit is established. Establish late payment penalties and minimum orders, and leverage technology like direct deposit or online payment to speed up the revenue stream.
#3 – Watch your expenses
Many businesses forget that a crucial part of cash flow is managing their own bill paying. Make sure you pay your bills promptly, and ask for extended payment terms up front. A supplier will usually extend credit for 30 to 90 days to a good customer who has established trustworthiness. Also, keep your overhead to a minimum. Before purchasing something, set a goal to increase sales to justify the expense.
#4 – Ask for help
Each step of cash-flow management is crucial to the success of your business. So, don’t be afraid to ask for help. Call on your accountant, banker, and personal financial advisor for advice in structuring your cash-flow management systems. By following these cash-flow tips, you will go a long way towards ensuring your business success.
Gwen Jones
