5 Tips to Improve Your Cash Flow
While you want to be able to ensure you have cash in the bank to cover your day to day operations, a clear cash flow forecast will also allow you to look to the future. So what are your financial goals? Can you see how and when you will achieve them? Whether you’re saving for a new vehicle, equipment or for the growth of your business, you’ll more likely achieve your goals if you create a road map and follow it:
1. 90 Days of cash flow
At a minimum, you should be aware of your cash flow for the next 90 days, however it is recommended to look ahead to the next 12 months.
Use your financial reports from previous years to determine patterns in the fluctuation of cash flow. This will give you an idea of where sales might be light and give you the opportunity to plan accordingly.
3. Separate Bank Accounts
Set up a separate savings account for the goals you have in place and arrange for regular transfers from your main bank account. This should be a set & forget arrangement. Consider the transfer as a paid bill, rather than money saved; having this bank account not linked to your usual accounts will assist.
4. Emergency Fund
Create “rainy day” or “emergency” accounts for infrequent or unusual expenses. Having money set aside for contingencies means financial dreams aren’t replaced by nightmares. Remember NOT to dip into these funds for regular fluxes in operational cash flow. Not being able to pay a bill on time isn’t necessarily an emergency or unforeseen expense- it simply requires a conversation with your supplier; however a broken down vehicle that is essential to the day to day running of your business needs to be taken care of immediately.
5. Monitor Spending
Though it may seem obvious, watch your spending. Focus on your goals and the value each purchase brings you. Is it worth the expenditure or will it put a bump on your map to the future? Avoid lavish spending if it means delaying or sabotaging your progress to those goals.
There are different ways to track and forecast your cash flow: pen & paper, spreadsheets or a software program such as Xero. Whichever you choose, ensure it is a method you can and will use on a regular basis. Update your cash flow projection regularly. Monitor spending and periodically re-evaluate goals. Remember, for businesses and for you, cash flow planning is one difference between success and failure!
For more information on Mastering your Cash Flow and Maximising Take home Profit, contact PROTRADE United today.