A good cash flow keeps a business alive, while a bad cash flow, sinks it. Cash is the lifeline of any business operation. By maintaining a cash flow statement, it can help you manage your cash flows better and prevent any liquidity crisis. However, if you have faced cash flow problems before, then here are some tips to avoid cash flow problems in future.
Set Up an Auto Billing System
Set up an auto billing system to make payments. This way you do not miss out on any payments and more importantly, you get payments on time. You can get your clients to sign for an auto billing cycle wherein the payment is drafted directly from their bank account or charged to a credit card on a specific day for each month. This will help you have better cash flow and prevent cash flow problems in future.
Improve Your Invoicing Processes
Accounting tools such as QuickBooks helps you improve your invoicing process and also concentrates on the core competencies of your business instead of maintaining your books of accounts. An accounting software reduces invoicing errors and delays, invoices reach your clients faster, collecting overdue invoices becomes easy, and you have a record of who is paying late. So, when your invoicing process improves, you do not face the problem of liquidity crisis and cash is readily available as and when required.
Avoid Storing Excess Inventory
Inventory should be managed efficiently. A huge volume of inventory level which cannot be quickly converted to cash easily is not healthy for your business. The larger the level of inventory, the more cash gets blocked. If you are not dealing in fast moving products, then they will remain in your warehouse for a longer period of time. Moreover, if the demand for your product decreases, you will find even more difficult to make get revenue and thus, you may face cash flow problems.
Create a Cash Flow Statement
In order to ensure you do not face any liquidity crisis, make sure you create a cash flow statement. Keep a record of all your cash transactions. It helps you know how much cash is available to you and in the case of any shortage, you can make arrangements for sufficient cash well in advance. Thus, creating a cash flow statement makes sure you have sufficient cash available as and when the need arises.
Cash flow can be managed in many ways. If you have experienced cash flow problems in the past or need help to manage your finances better, then it strongly recommended that you consult a professional accounting firm. The professional firm will ensure you are able to manage your funds better and you do not experience any cash flow problems.