The basics of cash-flow management
Ensuring the day-to-day operating costs of a business are met is one of the most important issues for small to medium enterprises, requiring efficient and effective cash-flow management.
Without carefully balancing revenue generated against paying suppliers, staff and other overheads, a business can face potentially disastrous circumstances.
Creating good business cash-flow involves carefully managing your customers, suppliers and assets.
Areas of cash-flow management
Customers - clearly communicating payment terms, issuing invoices in a timely manner and regularly chasing any outstanding invoices will all help to avoid common cash-flow management problems created by customers.
Suppliers - optimising your outflow to suppliers is to get the maximum time between placing an order and making payment. Asking for extended payment terms, using just-in-time payment systems or even reducing stock levels where possible, can maximise your business cash-flow.
Assets - buying the assets required to run your business, one of the costliest outlays, is worth avoiding where possible. Leasing, or buying on hire-purchase, what you might otherwise buy outright can be a better way to manage these costs.
Important questions to consider
Most of the potential problems associated with cash-flow management can be avoided through performing careful checks on these areas. Consider any areas of weakness and ensure these are addressed. For instance, are you running credit checks on new customers? Is your marketing strategy bringing in business? Are you always fulfilling your orders on time?
Good cash-flow management can be as simple as being aware of where all money is going into and out of a business and ensuring that this is happening in the most efficient manner. Get it right from the beginning and you can minimise the chances of dealing with the issues once they have become problems.
