Do you have questions about how to manage cashflow? Do you have concerns that you may have made mistakes in the past? Are you ready to make changes for the better?
There’s no shortage of cashflow tips you can follow. With the right approach, you’ll come to realize that there’s nothing to be worried about. Instead, you’ll have a firm grasp of your cashflow and what you must do to remain on the right path.
Here are five tips for better managing your cashflow:
1. Choose the Right Payroll Cycle
Does your payroll cycle align with your revenue stream? If not, you may find it difficult to make payroll. And even if you do, it may put an unnecessary financial strain on your business.
Consider all your options, including weekly, bi-weekly, and monthly. Compare the pros and cons to ensure that the cycle you’re using is the cycle that’s best for cashflow, your employees, and your business as a whole.
Here are some questions to address as you attempt to choose the right payroll cycle:
- What is your current payroll cycle?
- What are the pros and cons of your current cycle?
- Do you often struggle to make payroll?
- What does your revenue stream look like? Do you collect payments daily? Weekly? Monthly?
- How much work will it take to change to a new payroll cycle?
2. Keep a Buffer in the Bank
This is where many companies — especially small businesses — make a mistake. All of the money that comes into the business goes out the door sooner rather than later. And in some cases, the money is spent before it even arrives. That’s a problem that can soon bog down your cashflow.
By keeping a buffer in the bank, you always have money to rely on if your financial circumstances tighten. It’s better to be safe than sorry, as missing payroll should not be an option.
Answer these questions:
- How much money do you currently have in the bank?
- How much is your monthly payroll expense?
- What’s your plan if you’re unable to make payroll?
As your bank account cushion grows, your stress level will decrease. It’s nice to know that you have cash in the bank that you can lean on in the event of an emergency. If nothing else, it gives you options in regards to cashflow.
3. Learn More About Cashflow Financing
One of the biggest challenges of cashflow management is receiving timely payments from your clients. The unfortunate part of this is that you don’t have any control over the process. Even if you have a contract that clearly outlines the payment terms and conditions, it doesn’t mean your clients will adhere.
This is where invoice factoring comes into play. With this, you can receive payment today while also removing yourself from the collection process. This immediately improves your cashflow, opens more time in your schedule, and removes some of the financial anxiety associated with running a business.
Here’s how we describe the cashflow financing process on our website:
Submit your invoices to us and we’ll instantly advance you funds and handle collection from your client, freeing you up to do what you do best – grow your business.
Once you understand how invoice factoring works, as it pertains to your specific business, it’s easier to see when and how to proceed.
4. Use a Business Credit Card
It feels good to pay for everyday expenses with cash. Doing so allows you to avoid debt, which gives you peace of mind. This is also helpful if you run into financial difficulties down the road.
The problem with a cash-based system is the pressure that it applies to your cashflow. By using a business credit card, you free up cash for other expenses. You also have more money in the bank to deal with unexpected expenses.
Another benefit of a credit card is the ability to earn reward points or cashback for every purchase you make. If you’re going to spend money — and you probably are — you might as well get what you can in return.
5. Take Advantage of Technology
Technology has changed the world for the better (for the most part) and that definitely holds true when it comes to managing a business. If you’re not taking advantage of technology, you’re missing out on various ways to effectively manage your cashflow.
Here are just a few of the many things you can do to take advantage of today’s advanced technology:
- Accept online payments to collect receivables as quickly as possible.
- Pay bills via electronic fund transfers for time efficiency.
- Keep track of every purchase you make, deposit you receive, and payroll cycle you run.
Make a list of the many ways that you can use technology to better manage your business, and more specifically, your cashflow.
For example, an automated payroll system allows you to pay your employees on time and in full without much — if any — manual input. Just the same, use accounting software to keep track of expenses and income. This way you always have a pulse on your cashflow.
If you’re ready to take full control of your cashflow, there’s no better time than now to learn more about our services. At Revolution Capital, our invoice factoring/cashflow financing services are designed to help you successfully manage your company’s cashflow.