Cash management is vital in small businesses. Understanding cash flow is essential for the business's success, and not managing it properly can lead to business failure.
FREMONT, CA: Business cash flow is the cash or cash equivalent that comes in and out of the small business. If the amount of money coming in from customers is more than the amount going out of the expenses, the business has a positive cash flow. But if a cash flow going out is more than the amount coming in, the business has a negative cash flow.
Here are six ways to enhance cash flow for small business:
Spread out Expenses
Although making all payments on the same day can be easy, it is not suitable for cash management for small businesses. Set up automatic payments with the help of digital banking and utilize accounting software to monitor cash flow every month. Monthly payment options for products can be more suitable instead of paying in a lump sum.
Keep the Cash Working
Opening an interest-bearing business account can serve as the primary cash reservoir. Remember to keep the account as an immediate-access account.
Make Good Use of Accounting Software
Investing in good accounting software can help track the cash flow and handle it properly.
Be Smart with Payroll
Pay employees by direct debit to save money and time instead of writing checks. One cash flow tip is to run the payroll in bi-monthly rather than bi-weekly. This will mean that the business has 24 pay cycles every year instead of 26, which saves them the admin cost of two extra pay cycles.
Make Payments as Late as Possible
By making payments as late as possible, the cash stays longer and earns interest. A business can set up a direct debit to pay recurring expenses on the due date via digital banking so that there are no risks to paying a late fee.
Get Paid on Time
To improve cash flow in business management, train the customers to pay on time. Online invoicing software can send automatic payment reminders while adding one-click payment options makes it convenient for customers to pay faster.