Once your business progresses, the cash starts flowing, and it becomes vital for you to keep track of the money coming in and going out of the company.
We look at the four best ways to effectively keep track of your cash flow.
Schedule your expenses
Scheduled cost is an individual expenditure that is planned but can be changed whenever required and moved to your cost table once you have approved it as spending. If you find it difficult to keep track of your business finance, then it’s a good idea to schedule your expenses. Instead of buying a product whenever the need arises you can just schedule a specific time at which you can purchase the new items.
It helps you to remember all the monies the company has spent on particular products as it will all be in the records. Similarly, it becomes easy to pay and organise your outgoings, knowing you will have to do so on a set date. Organisations can also set rents and insurance payments for fixed times which helps you stay on top of your finances, avoiding any confusions and complications.
Inventory and Sale Reconciliation
Verifying your sale record can become a big problem for small businesses as you have to spend many hours ensuring everything is in order. But there is an easier way to keep track of cash flow during this process when you match your register with the sales you have made. The inventory includes all your properties, stocks and more significant sale items.
Since there are many products, its best to analyse the sales to find out which items are the most profitable and then track when you need to purchase the material for high selling ones. Similarly, you can keep a record of the things that you haven’t sold much of, so you don’t end up buying them needlessly. The process is simple; you count your total products and then re-evaluate and count them again to make sure the records are accurate. If there is some item missing, you try to figure out the reason for it and mark those as items you need to buy.
Cash Flow Projection
It is defined as the total estimate of all the monies coming in and going out of your company and includes all the future income and expenditure. It is just an estimate but it is very important to have an idea of these because if a business is strapped for cash, then they won’t be able to run their processes. Typically, such forecasting is done for a year ahead, but depending on the type of business it can be done for months or even weeks.
There are many benefits to this process because it shows if you are meeting your financial expectations by analysing your income and cost. It also benefits when you are planning to buy new equipment or apply for a loan. Plus you can eventually plan how to go about your future growth once you have an idea of your finances. A company may include the cash they have currently, the total money they are due from their clients and all other sources of income. After that, subtract the money you have to spend or may spend in future based on the assessment. Once you have an estimate, you can easily compare the actual amount with your projection and manage your cash flow accordingly.
Set up a calendar
Another way of managing the costs within a company is to set up a calendar that accounts for all the payments coming in. Usually, a timetable is arranged for customers who have to pay for a service they used or a product they bought. You give them a particular time to make the payment as mentioned on the invoice. You can know when the money is coming in and then manage your expenses accordingly. Usually, for small businesses, the most revenue is generated from sales, and it therefore becomes an important aspect to get right. There are different software solutions available that provide such services along with payments, scheduling, invoicing and payroll and many organisations utilise them to help in ensuring your income isn’t delayed.
These techniques will help you to manage your cash flow so that you are not placed in difficult situations that threaten your business’s ability to function. They help you to manage your finances and plan your growth accordingly. They’re definitely worth looking into if you are not utilising them already.