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Are you an entrepreneur or a businessman consistently looking for effective Cash Flow Management? If yes, then go through these strategies for managing cash flow.
Someone has said it right- ‘Cash is the backbone of a growing business’. But many entrepreneurs face the challenge of cash flow management today. It is very crucial, in particular for startups, to administer the organization’s cash flow. Hence, we have put down some top strategies for you to manage your business’s cash flow with ease.
But before that, let’s have a quick run through the true meaning of Cash Flow Management.
What is Cash Flow Management?
Cash Flow Management refers to the tracking and control of the money that comes in and out of a business. It’s actually a process. A process that involves observing, analysing and improving the cash flow of a business. Now, when we say improving, we actually mean improving the amount left after subtracting the expenses from the net aggregation.
“Cash is King in any business!” An entrepreneur, without a doubt, seeks sustainable business growth and one of the major aspects to support it is cash flow management. There are numerous reasons for you to manage and if required, improve your cash flow. One of the top ones is business expansion. If you manage to have a strong hold on your cash flow, you can scale your business as per your plans. Also, if your business is financially stable, you’ll be able to make decisions for your short-term and long-term objectives smoothly. In addition to these, the correct cash flow management facilitated ceaseless functioning chances to enhance financial strategies.
How can you Manage your Cash Flow?
Though there are several techniques to administer your cash flow, we have listed the top most effective ones.
1. Track your Expenditure
How important is accurate knowledge of your business expenses? Equivalent to, if not more than, the record of cash inflow. You should constantly monitor where your money is going and make changes wherever and whenever necessary. Remember, there will always be areas involving needless expenditures if you do not track every bit of spending.
Now, when you have thorough information about your expenses, cut down the unnecessary ones. This will help you to improve your cash flow to a great extent.
2. Analyze your Cash Flow
Perform a business cash flow analysis and make it a recurring process. Go through all your cash flow statements, starting with the current ones, and raise a series of questions. Questions relevant to your big clients and unexpected expenses. With these, you actually spot and highlight the major areas of operational risks. The more you analyze the more you expose yourself to possibilities.
You can hire an expert if you are not able to conduct repetitive analysis activities. If not, you can also automate this through certain software programs and applications.
3. Borrow before Sorrows!
There are instances when you require immediate cash. It’s good if you are able to crack that situation. But it can go sideways as well. Hence, we advise you to borrow money at the right time. Now, what is the right time? Any business always requires cash for growth. So, if you are operating smoothly and your business processes are progressing as per your plans, borrow money. Yes, that is the right time. Because at that point business stress is the least and so do risk.
4. Examine your Business Operations
The better you know and handle your business operations the better you will get at cash flow management. How? There are parts of a business that can be outsourced. If you identify those sections and utilise the services of freelancers or third-party providers, you don’t have to hire full-time employees. This saves you money as you are not shelling out salaries and monetary benefits.
In addition to this, there are always positive substitutions to many business actions you make. For example, you can repair an element if it’s not functioning properly rather than replacing it.
5. Employ Technology
Technology advancements are a boon to the business world. There are loads of applications and software that can streamline your business processes and increase efficiency. Similarly, when you talk about cash flow management, they can create budgets and estimate your cash flow. Isn’t that wonderful? Yes! This would help you to worry less about your cash flow and more about your business operations. Make a deal with the tech and scale your business with comfort!
6. Invoicing matters!
One of the major things that businesses need to improve is delaying the dispatch of invoices. Remember, you as a businessman should always be on top of the process of invoicing. Many cash flow issues occur due to poor invoicing systems. Even if you send your invoices as per your schedule, you may not receive all the amount in time. Hence, you should perform an analysis and stick to an invoicing routine that suits your business operation. So, just send out invoices whenever you are done with a specific task or work. You will have enough money in your hands to cover your expenses and this will improve your cash flow management.
If you are a businessman and you want to succeed, you must be in total control of your cash flow. There are several cash flow blunders that you may get trapped in. To avoid those, proper cash flow management is required. Even your earnings will not make up for a poor cash flow management system. Hence, focus on complete cash control.
With the above-mentioned techniques, you can be the master of your business’s cash flow.
Do you have any questions related to cash flow management or want to share some of your own techniques? Feel free to leave your responses in the comment box below.
About the Author:
Mr. Mayour Nandu, Managing Director of Growth Vidhyapeeth is a highly experienced business coach, guide, and mentor with over 17 years of experience. He has worked with more than 5000 entrepreneurs across 100+ industries, helping them master cash flow management, a critical aspect of business success.
Apart from assisting businesses with cash flow management, Mr. Mayour has also led corporate training programs at well-known companies like Godrej, Reliance, and Donear. He regularly conducts Cash flow Circulatory System training sessions for business owners. To learn more about his workshops or to seek guidance on improving your business’s cash flow, you can contact him on LinkedIn or via email at email@example.com.
Why is Cash Flow Management important?
Cash Flow Management is important in numerous aspects. Some of the top ones are:
-> Business Expansion
-> Making Business Decisions
-> Smooth Business Functioning
-> Opportunities to Enhance Financial Strategies
What are the 5 principles of Cash Flow?
The top 5 proven principles for better Cash Flow Management are:
1. Track your Expenditure
2. Analyse your Cash Flow
3. Borrow Money at the Right Time
4. Make Use of Technology
5. Improve your Invoicing Process
What are the 5 functions of Cash Flow Management?
Proper Cash Flow Management helps in a lot of ways. The top 5 ones are:
1. Provides room to expand your business
2. Supports you in your decision-making process
3. Directly or indirectly leads to the smooth functioning of your business operations
4. Forms the background of solid financial planning
5. Avoids unnecessary expenses
How can you manage your Cash Flow Effectively in 5 steps?
You can easily manage your Cash Flow by following the 5 steps given below:
● Have proper knowledge of your expenses
● Analyse your Cash Flow
● Improve your invoicing process
● Borrow money at the right time
● Make use of technology