Running a successful business isn't just from the start is a great idea. One of the most important aspects of an effective business model is proper cash flow management.
No matter how profitable you are, improper cash flow management will lead to poor business performance and even bankruptcy due to lack of cash flow. Below, SAPO will show the key factors you can apply to better manage your cash flow.
1. Estimate sales effectively
Any type of business needs to accurately calculate and predict revenue and profit margins in order to survive. Use a quantitative forecasting method to analyze past industry data, buyer trends, and sales data.
Conducting market research and marketing campaigns or launching new products to make a realistic forecast allows you to optimize and plan your business operations more effectively.
2. Stick to your budget
Without a budget calculator, your finances can quickly get out of control. A specific business budget is the key not only to spending planning, but also to keeping all costs in check to quickly adapt to business needs.
Having proper accounting books and a comprehensive budget plan is the necessary step to keep track of your financial numbers. Using professional accounting technology and software is the solution to help you to release future cash flows based on past financial data for budget planning
3. Proactive in collecting unpaid and overdue Invoices
Overdue invoices can be challenging for businesses because they cripple cash flow and absorb valuable resources. It must have a clear policy for businesses regarding the time frame written in the contract so that customers can make payments.
You can add a discount to your customers if they pay earlier to motivate them.
Conversely, it should also be provided a warning of a fine in case of late payment. The fact that you proactively remind customers before the payment deadline is also useful for their payment.
In addition, early payment to the supplier for a discount (if any) is also a good way as long as you still ensure cash flow for the business.
4. Prepare the financial backing for your business
Cash flow is essential to keep any business model alive. And financial backing is needed in the event of declining cash flow or unforeseen financial situations, such as slow business revenue or the burden of bad debts.
In the context of limited reserve capital, unsecured loans or short-term loans are probably important salvation for businesses to expand and develop further.
Having a well-prepared business plan is certainly the first step in ensuring that your business gets backing from a bank or an investor.
A knowledgeable owner will see the benefits of not paying any fees to apply for a loan, and this would be a great lifeline for you when you need it urgently.