Effective cash management is the first step toward ensuring you have enough funds to meet your business’s financial obligations. Cash planning helps you increase inventory, expand to new locations, and pursue other growth opportunities. It requires the focus and skills of everyone on your management team.
PROVIDING A SNAPSHOT
Your business’s cash flow statement is an essential document. It records the cash coming in (inflows) and cash going out (outflows), including cash from operating, financing, and investing activities. The bottom line shows the amount of cash available to the company. It’s a helpful starting point for your planning.
MAXIMIZING AVAILABLE CASH
Maximizing cash on hand should be a primary goal in managing cash flow. You can speed up collections by encouraging electronic payments and credit card use, and by offering customers discounts for prompt payments. Delay cash outflows by postponing payments to vendors as long as possible to keep more cash available.
Implementing a purchasing plan can also help prevent your business from holding excess inventory without receiving payment, which can tie up cash in unsold goods.
COORDINATION IS KEY
Maintaining close relationships with your financial, legal, and tax professionals can provide the guidance needed to keep your business running smoothly. Financial and tax planning are essential for small business owners. Professional guidance can offer an unbiased perspective on your efforts and help you better manage your business’s cash flow.