How to Manage and Proactively Build Cash Flow in Your Business

A strong cash flow is a deciding factor between a successful business and an unsuccessful one. It indicates the health of your business. This is why it’s so important to manage cash flow properly and take the necessary steps to build it up. 

Entrepreneurs who want to develop a cash flow system for best practices should follow these steps. From improving accounts receivable to better managing vendor contracts and product pricing, there are so many ways you should and could be building cash flow. 

Benefit from gains in revenue into the new year now with these tips for managing cash flow.

Track Everything and Utilize Forecasts

Keeping adequate records of revenue and expenses is one of the most important steps in managing cash flow. If tracking is off, your overall cash flow will be off. Good tracking also ties into creating a forecast. Cash flow forecasts show you where you expected your finances to be and can play a huge role in goal setting. 

Goals are a necessary means of making sure your business is striving and achieving in areas that will grow your company by leaps and bounds.

Use forecasts as a benchmark for reaching your cash flow goals. They will ensure you are on the right track and implementing the correct tasks and processes. Include forecast data and results after the fact in your financial reports. This will help your business keep on pace with any necessary changes that need to be made.

Keep a Close Watch on Your Accounts Receivable

Accounts receivable have a huge impact on your cash flow numbers. Keep accounts receivable prevalent so your cash flow is primed for smart financial growth. Do this by following and aiming to improve three simple processes you are doing anyway for your business:

• Collect payments on time
• Track exactly how much you are owed
• Know what is past due

Improving these areas can be much easier if you automate the process. You can also implement the assistance of an online accounting firm or CFO services from a third-party associate to give your accounts receivable processes an edge.

Update Vendor and Partner Contracts

Vendor and partner contracts can sneakily decrease your cash flow. They may go up in price over time, or you could be overpaying. Either way, it’s important to know what is happening between vendors and their services. Keep track of when contracts end or prices change. That way you can find a cheaper route that improves cash flow.

Ask for an updated price list on a monthly basis or whenever pricing updates are made by each of your vendors. You should also take advantage of any sales or price reductions on similar products and services when they arise. By looking over updated pricing sheets your vendors provide, you will have the information you need for smart purchasing decisions.

Vendors may also have a customer rewards program you can sign up for to save even more money. Watch out for any subscriptions or reoccurring product purchases, though. These may loop you into fuel price surcharges or other unexpected market-related expenses. You want to avoid making the mistake of signing lengthy contracts for items that you may not need in the near future as well. Be cautious of those vendor deals that look too good to be true, and you’ll stay on course with spending in this area.

Run a Pricing Analysis

If your cash flow is suffering, it may be because you aren’t charging the right price. Maybe you’re charging too much and customers aren’t making the purchase. Maybe you aren’t charging enough and your expenses are outweighing your revenues. A pricing analysis will help you set the right price for your business and, in turn, boost cash flow.

Tools and software are essential to this part of the process. You are able to increase cash flow through the smart implementation of free tools that will greatly benefit your business. Figure out where these tools can best serve your company with pricing analyses before you make any purchases. This will also make you savvier within the retail market for products that your company needs to use.

Work With an Experienced Accounting Partner

Cash flow problems are not something to let slip through the cracks. You need to manage cash flow issues properly by constantly working to find ways to correct them for your business. When you work with an experienced accounting partner, like New Economy, you can be sure everything is being done to move your cash flow in the right direction.

Right now, you can also take advantage of our free cash flow projection tool. Determine what else you can do on your own, for free, with our five pro tips for cash flow stimulation and confidence-boosting. 

We also want to hear from you directly. Schedule an appointment with us today to learn how we can help you grow your business.