The cash flow of your business is one of the most important aspects that helps indicate whether your business is in a healthy position or not.
A positive cash flow is when your company takes in more money than is being sent out, while a negative cash flow is the opposite.
As with any business, cash can be considered the most important indicator of financial health. Cash offers you, the business owner, a greater sense of relief because not only do you have more buying power so you don’t have to always rely on credit, but you also have protection against defaulting on a loan.
Managing the cash flow isn’t always an easy task, but there are a handful of best practices you can follow to make the process easier and to ensure the cash flow of your business remains positive.
No. 1 – Focus On The Management
Far too often do businesses get caught up in the profits. While it’s true that profits can determine the success or failure of a company, cash flow management is just as important.
Proper management will come after you determine the break-even point of your business, which is when you can expect to become profitable. The point of profitability will depend on your business, the industry you’re in, location and many other factors. It could be as soon as one year, or as long as three years.
But with good cash flow management, you can reach that break-even point according to your projections. To help ensure you’re on track, consider utilizing online banking services that will help make the process easier. For example, Bank Midwest offers these services:
Cash Management takes online banking to the next level allowing businesses to move money between accounts through ACH originations. Learn more.
Account Sweep Services gives businesses automated cash control leveraging accounts to give you a higher return on your daily operating cash by linking a business checking account and an interest-bearing sweep account. Learn more.
No. 2 – Collect Receivables
Receivables are assets that are owed to your business. These can be debts, monetary obligations, unsettled transactions or more. As such, you’ll want to collect receivables as fast as possible so your cash intake can improve.
However, not every customer is always easily accessible. You may need to make special arrangements to collect any receivables you’re owed. There are a number of online solutions that make is easier to collect funds. Bank Midwest offers these options:
Online Deposit allows you to scan checks or money orders, upload the electronic images to a secure website to receive your funds more efficiently. You can even collect customer payment information by phone and enter it in the system. Learn more.
Web Payments are an easy way to let your customers pay you in a timely manner. We set up a payments website branded for your business so your customers can easily enter account information and make one-time or recurring payments online. You just need to add the payment link to your own business website. Learn more.
Be sure to always maintain an open line of communication with your customers because there may be situations where you need them to pay with depository transfer checks. Discounts on products can also be an effective way to get individuals to pay earlier and faster.
No. 3 – More Customers
If you notice your business seemingly doesn’t have enough cash on hand, you’ll need to go out and attract new customers. You’ll still have to appeal to existing customers as well to ensure they keep coming back, or when they do visit, they spend more than normal.
Marketing your goods or services can be tricky. Appealing to new customers is a process that takes time and will not occur overnight. One way to go about this is to hold sales on items or services you’re selling. However, you have to be careful because sales may not always translate into more cash. Instead, you could be increasing your accounts receivable, which won’t always help improve your cash flow.
Managing the cash flow of your business is an important component of successfully running a business. It’ll take time to reach positive territory, but it’s a process that will prove to be beneficial to keep your company up and running.
If you have any questions about managing your cash flow, give our Business Solutions Support team a call at 844.238.3838