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How to Effectively Manage Cash Flow in a Small Business

Cash flow in business has to do with money that comes into a business; that is receivables or income and expenditures. There should be a proper cash management system in any Business or organization for the business to remain successful.

If you are an entrepreneur, you should master cash flow process in your business so as to minimize unaccounted money and avoid cash flow crisis in the long term. As a matter of fact, you need to manage your cash flow in your business in order to keep track of your finance, and also for easy tax calculation.

If you are an entrepreneur and you are interested in properly managing your cash flow in your business, then the following top 10 tips for cash flow management will be very useful to you:

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10 Tips for Managing Cash Flow Problems Effectively in a Small Business

1. Have a Separate Record

Cash flow has to do with keeping track of your finances, and an easy way to go about it is to keep a separate record for your income and your earnings. For instance; if you are using accounting software to maintain cash flow, the column for income or debit should be different from column for expenses or credit. This makes your cash flow records less confusing. Also, make sure that all entry must be made immediately; for example, if a debtor makes a part payment for debts owed the company, it should be recorded into the debit books immediately.

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2. Regular Review

You have to make out time to review your cash flow constantly. You can do so weekly, bi weekly or even monthly. Doing so will help you remember financial obligations and bills that need to be paid. To enable you do so on time, it will help you keep track of the Company’s debtors and enable you send regular reminders for them to pay up.

3. Increase Your Receivables

A good way to manage your cash flow is to devise ways to increase your receivables; that is income that comes into the company. Some of the ways you can increase your receivables include; investing more on adverts that will convert to sales, bulk purchase to take advantage of bulk discount, and reminders to the company’s debtors to clear their bills. Always make sure that the debits remain on a high positive while keeping the credits on low negative.

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4. Take Care Of Bills Early-: There are some bills that accumulate interest if not paid as at when due, that is why there is need to go though cash flow records to take note of upcoming payment dates for bills and pay up well ahead of time.

5. Have a Clear Means Of Receiving Payments

Another tip that will help you manage cash flow in your business is to set up a clear way of receiving payments from clients. Depending on the products or services you offer, your company should set up more than one payment option to allow your clients the choice to use any of the payments methods that suits them. With the use of e- payment platform, it is easier than to collect payments online via: Paypal, Payza, Skrill or any other e-processor. Other means like Check, payment order and transfers should be introduced.

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6. Use Softwares to Make It Easier

Using the traditional method of putting down financial records with paper and pen can be boring, stressful and time consuming. You can switch over to the use of software if your business or company haven’t introduced it yet; there are many Accounting and Bookkeeping softwares that will make your cash flow management system easier; look for it online and purchase it.

7. Open A Different Account For Each

This tip has to do with maintaining different bank accounts. Some people make the mistake of maintaining a single account for personal income and business money and small business owners are always guilty of this. Keeping a business account different from personal account will prevent a situation where you have to take money from your business account to sort out personal needs.

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8. Employ a Worker with an accounting background

If you are in a situation where you are too busy to manage your cash flow records or the cash flow records is so much that you find it difficult to handle alone, and then you can employ someone else to help out in maintaining the records. Someone with an accounting background will be an added advantage.

9. Use The Services Of a Factoring Company

If you have some debts that are due for payment and you have need for immediate cash in the organization, then you can make use of a Factoring Company. A Factoring Company issues you the total amount to be recovered minus an agreed percentage which will serve as a payment fee about 10% to 20% of the total amount; while the Factoring Company recovers the debt at the due date from the debtor.

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10. Set a Target for Cash Flow

You can actually set a target of how your cash flow will be in a period of time. This may be in 12 months time and you have got to map out how you will work towards achieving the target. Your target may look like this; launching another product within the three months, find another avenue to advertise the products to increase sales, while mapping out 15% percent of every income realised within the period will go into servicing the interest in loans and part payment of debts. Companies that set such targets for their cash flow experience over 50% positive increase on their cash flow.

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These 10 tips will help any business owner manage the company’s cash flow better; finally, also remember to remove bad debts from debits because the chances of recovering such debts are slim.