When it comes to business, growth is the ultimate prize that you should always be striving towards. But in order to capitalise on growth, it’s essential to keep a close eye on your company’s cash flow. Here, DUA take you through some of the key areas to consider when managing your cash flow.
Tighten your credit control
One of the most significant obstacles to maintaining a healthy cash flow is simply not having the correct amount of money available to you when you need it. Whether you’re waiting in vain for customers to arrange payment or jumping through hoops to chase outstanding invoices, time spent without the correct amount of money in your account will increase the likelihood of further complications and delays in your cash flow. Fortunately, you can counteract this common problem by introducing stricter credit control.
Credit controls are any system employed by a company to ensure that you are only giving credit to customers who are likely to pay, and that they pay within your agreed timeframe. This can include procedures for everything from the initial payment terms to what to do in the event of non-payment. Ultimately, it’s up to you which customers you offer credit to, but being clear about your terms from the very beginning and sticking to them closely will make the process far more efficient. Increasing the amount of payment options available to certain late-paying customers can also improve the likelihood of them paying on time.
By ensuring that all money is collected within the specified timeframe, and in the arranged manner, you’ll be able to keep track of your accounts much more clearly – making it far easier to keep your cash flow seamless and under control.
Monitor your costs & reinvest your profits
As with your credit, keeping close tabs and a watchful eye on all of your outgoings will help you ensure a more consistent and efficient cash flow, with fewer chances for unexpected shortfalls and blockages. Accounting software such as Xero can be used to set tracking categories that will monitor various different areas of your business, including costs.
One of the smartest and most forward-thinking decisions you can make for the long-term success of your business is to reinvest money back into its growth. For this you will need to closely monitor not only your costs, but your profits too. Calculate how much of your income will be needed to deliver on your commitments and keep the company running. Once you’ve established this you can decide how much of your profit is a sensible and rewarding amount to reinvest.
Betting heavily on areas of the business with an uncertain return is a risky move during growth – instead focus on investing small amounts in areas with a better chance of returns. Begin to establish a clear idea of what works and what doesn’t so you can streamline your reinvestments and keep the cycle flowing freely. Reinvesting during growth is all about striking a balance between putting enough in to stoke the fires and ensuring that enough cash is readily accessible.
Switch to Cloud Accounting
The benefits of using cloud-based accounting software extend above and beyond keeping an eye on costs – they can provide you with an extensive overview of your company’s finances, helping you to maintain a healthy cash flow.
DUA’s cloud accounting services allow us to keep a watchful eye over your business and its finances, so that we can offer you detailed, customised advice when necessary. We deliver more than advisory services – our accountants in Watford and London work with you to support and guide your business throughout its growth.
Get in touch today to find out more about how DUA can help with your cash flow management.