Cash is king when it comes to the financials of a growing company. The lag time between when you have to pay your suppliers and employees and the time you collect from your customers is the problem, and the solution is cash flow management. At its simplest, cash flow management means delaying cash outlays as long as possible while encouraging anyone who owes you money to pay it as rapidly as possible.
Here are five easy to implement tips for better cash flow management in 2022 that will provide you and your company a solid financial year.
1. Measure and Monitor Cash Flow
The best tip for better cash flow management might also be the simplest tip, to be constantly and accurately aware of your cash flow.
Some tips to do this include:
Measure cash flow
Consider making a cash flow worksheet
Assign someone to be a cash flow monitor
The first step in managing your cash flow is knowing the exact numbers of your cash flow.
2. Improve Customer Relations
Customers are a crucial part of the cash flow management process. Improving relations with your customers improves your receivables and allows you to collect more cash for your cash inflow. The best way to avoid conflicts between you and your customer is to have a clear and defined system of how and when they pay you. Outline exactly what is and isn’t acceptable. Avoiding these conflicts will result in happier customers. Happy customers have a higher retention percentage.
3. Have a Safety Net
Cash is king. Maintaining cash reserves may be the most important cash flow management tip. The future will bring unseen problems, so prepare for it. Having a solid cash reserve will allow you to survive shortfalls. Having no cash is a dangerous and unnecessary risk.
4. Reward Good Behavior
Institute creative sales incentives. Make your employees want to do their work. Incentivize customers to pay early.
5. Utilize Technology Efficiently
Cutting edge technology can save costs and make production more efficient. Be wary though. Constantly updating phones, computers, or software can be costly without adding much to your overall cash inflow. Be prudent with the newest technology.
An additional cash flow management tip: when you do decide it is time to upgrade your equipment, either sell your old equipment or consider buying used equipment.
These are some tips you and your company can use to manage your cash flow, but remember there is always more you can do. Being diligent when managing your cash flow can lead to better financial results and company success.