Cash flow is critical to the survival and prosperity of any business. When you don’t have enough liquidity, you might find yourself faced with a constant struggle to pay your workers, suppliers, and debtors. This might draw your focus away from crucial strategic matters, and, in some cases, inflict avoidable extra costs on your business as a whole.
Understand Your Current Cash Position
To begin with, you’ll need an accurate picture of how much cash you have access to on a day-to-day basis. Without this knowledge, you won’t understand the extent of the problem, or the lengths you’ll need to go to in order to fix it.
Speed Up Invoicing and Collections
The more promptly that you issue your invoices, the sooner your customers will be able to pay the outstanding amount. You’ll need to be clear about when, and how, you expect to be paid, and to stipulate financial penalties that will disincentivise late payments, and cover their cost. This is an area in which the right automation might make things faster and more efficient.
Control Costs Without Cutting Growth
You’ll want to try to optimise your spending in key areas. This is an ongoing process, which involves identifying where you’re overspending, and renegotiating contracts where necessary. A successful negotiation is typically preceded by good planning, which involves having an idea of what a good outcome looks like. If your work is highly seasonal, then you might resort to temporary agency workers. This way, you’ll be able to expand and contract your workforce in accordance with demand.
Plan for Seasonal or Unexpected Gaps
In some cases, your cash flow might be interrupted by seasonal factors. If you exclusively sell Christmas-related items, then you might expect business to be slower in July. In other cases, the interruptions might come as something of a surprise.
Whatever the cause of the gap, you’ll need to know that you have enough cash to cover it. The right money transfer for a business solution might allow you to keep payment flows between you, your suppliers, and your partners, constant throughout the year.
Review and Adjust Regularly
Your relationship with cash is sure to change regularly over the lifespan of your business. As such, it isn’t enough to simply devise a strategy and stick with it. No one strategy, after all, is going to be able to fit every scenario you’ll be faced with.
Try to review your cash situation at least once a month, and spend some time planning for certain key risks. By thinking about how you’ll respond to a cash-related emergency, you’ll avoid the temptation to panic, and to make the wrong decisions in the heat of the moment.
