When it comes to the operations of a business, cash is the lifeblood that circulates through a company. It is the cash flow of a company that provides them with the means to operate.

What is cash flow?

Cash flow is the movement, or flow, of money, whether physical or virtual, into and out of a business. Typically, a company’s cash flow is measured at least every month.

As an entrepreneur and business owner, you will be responsible for cash management and the inflow and outflow of money that enters and exits your business.  

When it comes to measuring cash flow, businesses should seek to have a positive cash flow over a negative cash flow. 

Positive cash flow: Positive cash flow means a company is increasing its liquid assets, allowing them to cover expenses, reinvest in the business, pay off shareholders while also possessing a cash reserve to offset future financial issues that might arise. 

Negative cash flow: Negative cash flow occurs when a business spends more than it makes within a given period. Negative cash flow is a common financial occurrence for new businesses and dealing with negative cash flow is almost unavoidable. 

If you’re looking to get your company out of financial strains by improving cash on hand, Osidon has prepared some useful tips for boosting your cash flow.

Track your inflows and outflows  

Accounting and invoicing software is the easiest and simplest way for you to stay on track with your business cash flow. Software can automate much of your business processes and allow you to have an overview of your business cash flows at any point in time. 

It's in your company’s best interests to have an experienced accountant handling your finances.

Collect receivables  

Accelerating your accounts receivable to maximise cash flow is one of the most significant ways to improve your business’s cash on hand. Receivables refer to the amounts owed to your business, which are assets, typically from customers who pay on credit. Calling in customer debt is one way to improve the inflow of cash from assets in a month.

Manage your accounts payable  

Establishing and organising your accounts payable process will be essential to improving your company’s cash flow. Get to know your vendors and extend payment terms as long as possible. Most vendors will ask businesses for payment after 30 days, but once you build up a positive relationship, they may be more inclined to offer extended payment terms. The longer you have to pay, the more time you have to get money in.

Increase sales

Strategise with your sales team to determine how you can best move products from the shelves into your customer’s hands, quicker and in larger amounts.

Re-evaluate the pricing of your products

Another way for you to increase your cash flow is by increasing your prices. Changing - and more specifically increasing - prices is something many business owners are scared to do. There is no guarantee that increasing prices won’t mean losing some sales, but it could also mean an increase in cash inflow.

Prioritise invoicing procedures  

Your business’s invoicing payment terms can significantly affect the amount of cash you bring into the company each month. If you provide a net 30 pay date, you allow your customers to pay at a later date, even though you have already given them your goods or services. Therefore, if you require greater cash flow in the coming months, you may want to revise your payment terms to ensure cash reaches your account sooner. 

You can offer your customers a cash discount as an incentive to pay early. This is a tactic which often encourages your customers to pay you early on, which will effectively improve your cash inflows. You could also make it clear that late payments will be punishable.

Provide various payment options

Provide your customers with a quick and easy way to pay their invoice. Things like email invoicing and payment links within the invoice can help your clients streamline the payment process. You could offer loyal customers the option to sign up for automatic payments, ensuring cash is steadily flowing into your business each month.

Cut costs and track expenses  

One way to boost your cash flow is to decrease the amount of money flowing out of the business at any given time. This means cutting out non-essential expenses from month to month. Your business should always track expenses to determine where the money is going and how it is being spent.

Cash flow forecasting

Cash flow forecasting is a proactive way to prepare your business for future financial issues. Knowing what’s coming your way can help your business prepare accordingly. Tuck away some of your savings in case of a negative cash flow next month, or decide how best to use a positive cash inflow for the greatest impact. 

Using the tips outlined above, you’ll be able to speed up your cash flow and position yourself to win in the game of business.