Cash Flow Management Do’s and Don’ts | Behalf
The Do’s and Don’ts of Cash Flow Management
Managing cash flow for your company can be overwhelming but it is essential to your business’ success. Cash is your company’s lifeblood and you need to make sure more is flowing in than out.
Here are the Do’s and Don’ts of managing cash flow for your business:
- DO handle Accounts Receivable aggressively. When it comes to cash flow management, no business can afford to be shy about asking for payment. The second most common reason businesses fail is delayed or insufficient receivables. Make collections a standard part of your cash flow management: invoice immediately, remind clients of deadlines, and follow up on outstanding receivables at set milestones.
- DON’T impulse spend. Though luxury office furniture may improve your business’ feng shui, it makes managing cash flow harder. Unnecessary costs can add up and threaten your cash flow when your business inevitably hits a rough patch.
- DO keep a sizable cash reserve for a rainy day. On average small businesses keep merely 27 days worth of cash reserves, which is alarming considering 3-6 months is recommended to sufficiently carry a business through slower business days and emergencies.
- DON’T overestimate your future sales. It is important to be realistic when setting up a cash flow budget and every business’ sales have peaks and valleys. There are cash flow management tools to help you reach a comfortable understanding of where your cash is coming and going, incorporating foreseeable dips, so as not to give you a false sense of security.
- DO provide customers with terms and conditions. Transparent terms are key to managing cash flow effectively. You must set terms and conditions for your company and make your customers aware of them early on. You also want to confirm payment agreements by email, to ensure that everyone is on the same page.
- DON’T limit yourself to basic receivables as your only source of cash flow. Factoring and credit card processing are ways to speed up receivables that could spare you some of the financial headache. Unfortunately, they are a costly and limited cash flow management solution. Every business should have an affordable line of credit that they can tap, as needed, when cash reserves are low.
Managing cash flow for your business can be challenging, but easily mastered with the right tools. You can pre-qualify for a Behalf purchasing line of credit to increase your capital reserve. Using Behalf to fund your large business purchases instead of cash frees up working capital, while also giving you flexible extended terms on everything you buy. With your choice of up to six month terms on the goods and services you need to grow your business, you can have effective cash flow management.