Managing Cash Flow
Whether your work is seasonal or consistent, it's important to manage your cash flow all year long. Learn more about how to stay in the black no matter what month it is.
How to Maintain Ideal Cash Flow
It happens: your vendors and employees need to be paid before you collect your own payment from customers. How can you avoid the lag time between the two? Cash flow management. It sounds simple. Just delay your own payments while trying to speed up payments owed to you. In reality, it can be a little more complicated. Here are some tips to help you simplify things, so you don't run out of cash in the future.
When you're creating a budget, be sure to make your projections carefully. Proper planning and budgeting can let you know about cash flow problems well before they start, so you have time to fix them before they happen. Be sure to include information about the cash you currently have and what you expect to receive over the next few months. Then, create lines for how much you expect to outlay in the same time period. Once you know what's coming, you can handle it more easily.
Speed Up Your Receivables
A key step in improving your cash flow is to receive payment from your customers faster. Ideally, you would receive payment at the point-of-sale. Of course, it doesn't always work that way. For your customers who pay by invoice, try these tips to help speed up payment: Offer discounts to your faster-paying customers, or charge a late-payment fee. Ask for deposits or credit checks from new customers. And, be sure to track your accounts receivable. If anyone is consistently late, ask them to pay cash on delivery going forward.
Slow Down Your Payables
One alternative to faster receivables is to pay your own bills more slowly. This can allow you time to take in cash for your products before you pay out. Take advantage of longer payment terms when they're offered. Try to pay electronically, so you can keep funds in your accounts as long as you can. And, don't be afraid to be in communication with your suppliers. If you've built up trust with them over several months or years, they may be flexible with your terms when you have a shortfall.
Managing Inevitable Shortfalls
It happens to almost every business at one time or another: a shortfall. If you don't have the cash on hand to pay a bill that is due, be proactive about it. You have lots of options, so don't feel trapped. You may be able to get a loan to help fund the shortfall and keep your business solvent. In fact, if your business is seasonal or you foresee shortfalls in your future, it's a good idea to apply for a revolving line of credit so that you never fall short. If you have a good relationship with your vendor, don't be afraid to ask for an extension on payment. And, if all else fails, you can ask some of your customers for accelerated payment.
Top 3 Things You Should Know About Managing Cash Flow
The 3 Components of a Business's Cash Budget
A cash budget is like a view of the future of your company. Here are three components you'll need to make one of your business today:
- Time period − what time frame the budget covers
- Estimated cash position − how much cash you wish to keep on hand at all times
- Estimated sales and expenses − how much you plan to sell and how much it will cost to do so
Automate Your Cash Flow
With so much banking done online today, there's no reason not to automate your cash flow. When you automate your billing and collections, digitize your payables and outsource your payroll, you'll find time and cost savings. The ability to monitor transactions online — and in real time — enhances your ability to manage your cash position at all times.
Related Products and Services
Ready to Open an Account?
Learn more about our different accounts and services, and then when you're ready, simply contact one of our Small Business Bankers. We're here to help.Make Appointment