In this uncertain economic climate, in order for your business to survive, one must improve cash flow.
Accounting plays an important factor in managing your business cash flow. In these times, having accounting software is a much better way to cost-effectively and easily manage one's cash flow as it can help you collect your receivables as fast as possible and slow down your payables without jeopardizing your relationship with suppliers.
Aside from having accounting and bookkeeping software, one must think of ways to improve their cash flow.
Here are some accounting tips to improve business cash-flow:
-Cash Flow Analysis. First and foremost prior to starting to improve your cash flow management, a detailed view of how your business manages cash must be obtained. Analyze your accounts receivable, accounts payable, credit terms and inventory.
-Accounts Receivable. Your business' accounts receivable make up a large proportion of the cash coming into a small business. So it is important to keep a close eye on them.
How?
Keep on Top of Payments. Always be aware when customers' payments are coming due. You can do this by using a bookkeeping accounting software as they can generate an accounts receivable aging report. In this way you can keep track of the habits of your customers over time which will help you identify which ones are likely to need to be prompted to pay.
Promptly Collect Your Receivables. Don't wait for your customers to decide they want to pay you. Have a process in place for invoicing and collections. Stick to them as the longer your receivables are outstanding, the harder or the less likely you are to collect. To collect promptly, you must establish a due date on the invoice and then send out a follow-up statement within 10 to 30 days from the due date.
Make it easier for them to pay. Be prompt in issuing your invoices. If customers regularly receive their invoices in a timely manner, there is a high chance for you to receive your money quickly. Make sure that your customers know exactly when payment is due as well as offer to them an easy and fast payment options, such as fax and online methods. You could also offer them discounts if they pay early.
-Accounts Payable. Carefully monitor your outflows as it is beneficial to you to keep cash on hand for as long as possible.
Manage your due dates. To do this, you can make payment on an invoice on the day it is due to keep consistent cash flow. Do not pay early as it can leave you short of cash at a crucial time. Organize your outflows by arranging electronic fund transfers with your financial software.
Have your payment times extended. Negotiate with your vendors and try to work out an agreement so that payments are spread out and payment times are extended as long as possible.
Strengthen your relationships with vendors. This is useful in cases you need to delay payment in the future.
-Inventory Management. This basically involves monitoring your daily sales activity and making steps to ensure that your on-hand inventory reflects these patterns. Use a retail management software so that you can generate a forecast on how demand will ebb and flow throughout the coming months. It is common to have 80 percent of your revenue coming from 20 percent of your inventory. Once you figure out which of your products applies, you will be able to make informed decisions about how much of a certain item to order - and when.
In cases when you find yourself with an out-of-date inventory, the best strategy is to sell it for the best price you can as inventory that is not being transformed into cash is useless.
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