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Cash flow management essentials

Here are some tips to help you manage your cash flow: you will need to know what contributes to determining cash flow. You will need to know the breakeven point. Focus more on how much money you have than on making a profit. Make sure that you have a cash reserve. Prepare a cash flow worksheet to monitor your money. Manage your accounts receivable as well as your accounts payable.
Determining cash flow involves:

• Accounts receivable
This is what your customers owe you.

• Accounts payable
This is what you owe others.

• Shortfalls
This is a deficit.

As a business owner, one of your goals is to maintain cash flow at all times. This means you will have to manage your accounts receivable, accounts payable, and any shortfalls. The following tips will help you determine your cash flow.

Know the breakeven point

Try to figure out when your business will make a profit. You can use that information to project future cash flow. There is no such thing as a negative cash flow. In other words, if you have no money, you will not be able to pay the bills. Try your best to manage your money until you make your first profit.

Do not focus on profits

In the early stage of getting your business off the ground, it is advisable to concentrate on managing your cash and not trying to make a profit. Use the breakeven point as a way to gauge your cash flow. Even if your business is profitable, you will still need to maintain a money flow. It is more important to keep a close eye on things when you are starting out.

Have some extra cash

Most people have emergency funds just in case something happens. The same should apply to your business. Have some cash reserves for those times when you need payroll funding for businesses. It is advisable to start out with the cash reserve. It will make things easier to maintain a positive cash flow.

Cash flow worksheet

The majority of financial software has a cash flow sheet. You can export the template into an Excel workbook and customise it to suit your needs. Use the worksheet to maintain your spending habits. Start the sheet by adding cash on hand at the beginning of the period. Include cash to collect from other sources.

Know when and how much money will get spent. This means that you will have to tally up all the bills that you have to pay going forward. List all the bills on a separate line. You will have a line item for rent, supplies (individually), salaries, and wages, and other expenses.

Have someone monitor cash flow

Set a threshold to ensure that your cash does not fall below a certain amount. For example, if your cash balance is at $1,000, have your bookkeeper notify you so that you can remedy the situation with a cash injection.

Accounts receivable management

Do not hesitate to collect from customers who owe you. As soon as payments get due, call immediately to get invoices paid. When setting up your contracts, use net-30 and net-60 days.

• Offer discounts
You can provide your customers discounts that will encourage them to pay their bills faster. Offer a two percent discount if they pay within ten days. You can also include a stipulation in the agreement to have the customer pay a small percentage of the fee upfront before you start the work.

• Credit checks
Do credit checks for all new vendors who are not paying by cash.

• Old inventory
Do not hold on to outdated inventory. Get as much as you can for it.

• Issuing invoices
Send out invoices as quickly as possible.

• Track accounts receivable
Stay on top of who is paying on time. For slow-paying customers, offer cash on delivery (c.o.d.). That is a polite way of getting rid of slackers.

Use creativity to increase sales

You can sponsor a contest as a way to boost your sales. You can host a customer appreciation event. Give the customers referral incentives. Additionally, you can also take your employees on a publicity tour to help promote the business.

Make payable terms as long as possible

When paying your vendors and suppliers, try to have your creditors set up for net-60 or net-90 days. Some companies will charge a late fee. Make an effort to send payments on time if that is the case.

In conclusion, staying on top of your cash can be daunting, so you will need some tips to for extra guidance. You will need to know the breakeven point. Have some cash reserves and prepare a cash flow statement. Manage your accounts receivable and your creditors.

4 May 2016 16:09


About Boris Dzhingarov

Boris Dzhingarov graduated UNWE with a major in marketing. He is the CEO of ESBO ltd brand mentioning agency. He writes for several online sites such as,,, Boris is the founder of and