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Cash flow – ensuring your business is healthy
Having a healthy cash flow has a massive impact on your business’s investments, revenue, profit, and performance. A healthy business needs a healthy cash flow. Poor cash flow can result in a business facing financial challenges that can impact its efficiency. Smeloans share that 34% of SMEs have an unhealthy cash flow because of late payments and have to rely on overdrafts to help them meet their monthly obligations. In this article, we will look at what a healthy cash flow is and how to ensure that your business has one.
What is cash flow?
A business’s cash flow is the movement of money in and out of the company, with money coming into the business being cash inflows, and money going out of the business being cash outflows. Overall, the money that a business has at any given time will be a business’s cash flow. A healthy cash flow will help businesses cover any costs from challenges that may arise, for example, broken machinery. This makes it important to make sure that your business does not have too many outflows and too few inflows of cash.
What is the difference between cash flow and profit?
The key difference between cash flow and profit is that your profit will only show you the remaining money your business has after revenue and costs have been calculated, while your cash flow will consider all of the different money that flows in and out of your business. Knowing your cash flow will give you a better indication of your business’s long-term financial forecast, while your profits will only give you information about your immediate success.
The benefits of effective cash flow management
Effective cash flow management will give your business many benefits such as:
Better forecasts – Your business will be able to better forecast your costs and revenues. This will help you be better prepared for any challenges that may present themselves to your business. You will be able to predict shortfalls that may happen, such as late payments that may impact your business’s finances.
Reduced stress – Cash flow management will help you manage and reduce your stress. With there being a lower risk of any surprise challenges happening that you are not prepared for, you will have better peace of mind. This will alleviate stress and anxiety to create a better and healthier work environment for management and team members.
Drive your growth – If you manage your cash flow effectively, you will be able to keep your business prepared to deal with any unexpected costs. This will help your business continue to grow and expand at a steady pace while avoiding regression with a negative cash flow.
Better understand your business – Understand where and why your business is spending money. A better understanding of this will help your business identify costs that you do not need and identify opportunities for expansion.
Increase sales to improve your cash flow
Increase your sales to generate more revenue, increasing your inflows and resulting in your business having a healthier cash flow.
Get paid on time – It is important for your business to get paid on time, as this will make it much easier to manage your cash flow and have a steady predictable inflow into your business. Your business will be able to stay more aware of the money available in the business and be prepared for challenges that occur. Read the complete guide on sales invoices to make sure you get paid on time.
Use upselling techniques – If you embrace upselling techniques for your customers, selling them products or services that complement what they already have, you will likely increase your sales and revenue to create a healthier cash flow in your business.
Use cross-selling techniques – Offer your customers complimentary products or services to buy with their original purchase.
How to effectively manage your cash flow
Make sure that you effectively manage your cash flow by following these tips:
Be proactive and not reactive
Being proactive with the management of your cash flow is a very important factor in ensuring that you have a healthy business. Reactive management of your cash flow will mean that your business does not try to control the inflows and outflows of money, increasing the chances of problems occurring. While proactive management of cash flow will mean that you are constantly monitoring and controlling the factors of your cash flow such as payrolls, bills, and investments to have the healthiest cash flow possible.
Regularly monitor and review cashflow
You will not be able to be proactive in the management of your cash flow if you do not monitor and review it regularly. By regularly monitoring and reviewing your cash flow, e.g., monthly or quarterly, you will be able to stay aware of the inflow and outflow of your money and adjust where necessary to create a healthier cash flow.
Embrace flexibility
Flexibility is key when managing your cash flow as it will allow your business to always adjust and evolve when needed to create a healthier cash flow with more inflows than outflows. This will let your business have the ability to evolve with the market, for example, if supplier costs change you will be able to adapt to the change and be prepared for it.
Cut costs where possible
If your business cuts costs where possible, for example going fully digital cutting office equipment costs, you will have a healthier cashflow due to a smaller cash outflow.
Make smart investments
Investing in machinery or technology, like CRM software, can cut your costs in the long run making it a smart investment to make. CRM software can streamline management, allowing your business to save costs and resources which will create a healthier cash flow. Based on stats/research/reviews
Streamline your cash flow management with TEB
TEB is a sales automation CRM software that will help your business streamline the management of your cash flow to create a healthier, better-performing business. TEB will increase your data visibility while helping your business increase revenue and sales. The way TEB does this is with unique features such as:
- Generate 250+ reports – Generate reports on every aspect of your business to increase your data visibility and streamline your managerial decisions
- Generate custom reports – Target specific areas to generate reports to get the data that you need at anytime
- View your customer storyboard – View your entire customer journey in the form of a storyboard to better understand your customers and offer them a more personalised service
- Organise your customers – Use TEBs custom funnels and filters to organise your customers in terms of priority to win more deals and create a healthier cashflow
See first-hand all of these features and how TEB can streamline your management by scheduling a demo with us.
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Sales Invoice – The complete guide to getting paid
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