One of the most challenging tasks faced by small business owners is maintaining a stable cash flow.

A recent Intuit research found that 61% of businesses encounter cash flow issues globally. Furthermore, it has been reported that poor cash flow management contributes to the failure of 50% of small enterprises within five years of their launch. So let us understand what cash flow is and how to solve cash flow problems in a small business.

Cash flow is the movement of funds in and out of your business. It acts as the basis for the sustainability of your company. You can apply modern technologies, grow into new markets, and make regular payments if you manage the cash flow of your small business effectively.

Here are 5 ways to improve your cash flow management:

1. Make sure your books are updated:

A common bookkeeping mistake made by small business owners is failing to keep their records up to date.   Ensure that your books are up to date. If you keep your records up to date often, you may use them to follow the money as it moves through your company and, if necessary, give a detailed picture of its financial status.

If you lack trust in numbers, hire a qualified public accountant or outsource your bookkeeping requirements to a third-party organization.

2. Quick Recovery of Receivables: 

Increasing receivables collection speed is one of the finest ways to manage cash flow. The strategies listed below can be utilized to quickly recover your receivables:

• Try to be as honest as you can with the payment arrangements.
• Send out invoices right away.
• Offer incentives for on-time payments, such as discounts.
• Provide a range of payment choices.

3. Optimize Accounts Payable: 

In the past, it has been recommended to receive money as soon as possible and to postpone paying bills out of your own pocket as long as you can. Delaying payments, according to Deloitte, can harm relationships with suppliers since they are less willing to resolve issues, take longer to respond to questions, and have stricter payment terms. Therefore, it may be dangerous to postpone payments in the long run.

Businesses must take the following actions in order to maximize accounts payable:

• Streamline the bill-paying procedure.
• Establish a strong relationship with your suppliers so you may talk to them about payment conditions.
• Regularly examine your spending
• Make the purchasing procedure automatic.

4. Utilize Technology: 

You can utilize technology as a smart tool to better manage your cash flow. By combining all activities involving cash transactions into one system using technology, you can more easily keep track of cash inflows and outflows. It will also be straightforward to spot any warning signs and take the necessary steps to fix issues before they have a negative impact on the company because it gives real-time information. Because you won't require complicated spreadsheets or paper ledgers if you have access to real-time data, it will be easy for you to overcome cash flow forecasting challenges.

5. Maintain a cash reserve as a backup: 

Make arrangements in advance to meet these costs in the event of unanticipated occurrences by keeping a cash reserve on hand. If your records are up to date, it will be simpler to determine your liquid assets and the expenses you can write off.

Keeping your credit score high makes it easier to obtain short-term business financing. You can get emergency cash by using company credit cards, which will also help you raise your credit score.

How can we help?

Regardless of the size of the company, cash flow is its lifeblood. IBN Tech is an industry expert well-versed in cash flow management techniques. Get in touch and understand how your business can benefit from these services.