Understanding Cashflow Management In Business

Understanding Cashflow Management In Business

“When I started this company 3 years ago,” Ken, a young Nigerian who launched his fashion startup began saying, “I didn’t know how to run a business, I figured all I needed to succeed was to make sure I sold lots of fashion wears every day.”

“I was dead wrong.” Ken continued. “After 1 year in the business, I discovered that although I sold lots of wears, at the end of the month, I couldn’t pay my staff, pay for rents, or even buy new wears.

Does Ken’s plight look similar to what you are experiencing in your business? Do you make lots of sales but at the end of all expenses, you notice you don’t have enough cash to reinvest into your business?

When it comes to the financial management of any business, its often said that cash is king. It’s the key to business survival. Cash-flow management is vital to the health of your business. Its effect is real, immediate and, if mismanaged, totally unforgiving.

Thus, your business cash needs to be monitored, protected, controlled and put to work. This article shows us how to properly manage business cashflow.

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Monitor Your Inventory Efficiently.
Analyze inventory movement to determine which items are selling and which ones are buds that soak up your working capital. Try to keep inventory levels lean so that your working capital isn’t tied-up unproductively and unprofitably.

Control Cash Outflows.
Holding onto cash longer is just as important as getting paid faster. The best way to control cash flow is to stay on top of your expenses. When we start making profits, we often tend to ignore the cost cutting opportunities. Unmanaged outflow could be a silent business killer.

Get Paid Faster.
Collecting payments for service rendered quickly is one of the best ways to improve your company’s cash flow. Bill early, collect quickly. To guard against late payments, bill as early as possible and make your invoices as clear and as detailed as possible.

Track Your Progress
Monitoring your cash flow and making financial projections regularly, is one of the most important things you can do to track the financial pulse of your business. According to Elaine Pofeldt, author of The Million-Dollar, One Person Business, “There is really only one way to address cash flow crunches, and it’s planning so you can prevent them in advance.”

Cash flow issues are not reserved for seasonal or niche businesses. Even a business with the most “in” product or service can run into cash flow problems. The better you can get at managing your cash flow, the more likely you are not only going to survive but thrive.

At Knight & Bishop, we help guide bold and audacious entrepreneurs as they make business decisions. Our job is to support your business on its growth trajectory through advisory and hands on assistance as you build.

Let’s get talking today.