Five tips to improve your cash flow.

“Making more money will not solve your problems if cash flow management is your problem.”

– Robert Kiyosaki.

Whether your business is importing, distributing, manufacturing or in the services sector, cash flow is the lifeblood of your company. It’s what keeps the lights on. However, it’s tricky to keep the incoming money line up with the outgoing money.

Here are five practical tips to help.

 

1. Invoice quickly

Prepare and send invoices with your goods at delivery or when the work is done. Don’t wait for your month end. Invoice for part of a project upfront, particularly if you need to invest in products or people to help you do the work.  

Pro Tips:  

• make invoices easy to read 
• ensure your terms are clearly stated
• list the due date stated in a few places (maybe in bold)
• provide clear instructions on payment types accepted
• include late payment fees information if applicable

 

2. Make it easy for customers to pay

Make use of a mobile payment method so you can get paid on the spot. Consider an app or device that turns your smartphone or tablet into a mobile POS terminal.

If mobile payment isn’t for your business, simplify the payment process by making online payments possible. Say goodbye to chasing customers for payment.

Pro Tips:  

• test your digital payment method to ensure it works properly 
• implement the highest security
• never store credit card information
• provide clear instructions for customers
• choose your target audience’s preferred payment method

 

3. Use technology to manage cash flow

Use a cloud-based accounting system to manage your accounting and tax workload. Many offer job costing and quoting, payroll, and inventory management, removing additional administration tasks.

You can eliminate many costs associated with paper, printing, and postage by going electronic, and the CRA also accepts many submissions electronically.

Pro Tips:  

• ensure remote access and multiple users are options
• research plans available
• ask for recommendations – The Rayne Firm uses and recommends QuickBook Online
• confirm CRA compatibility
• choose systems that integrate with your other systems or apps (i.e. QBO work with Square and Hubdoc)

 

4. Evaluate Your Expenses

Evaluating your expenses is the fastest way to determine if you are spending too much and to decrease your cash outflows.

Pro Tips:  

• consider your current service terms with your suppliers
• shopping around for new utilities (phone, gas and electricity)
• determine if you have any unnecessary expenses
• cancel any recurring, unused subscriptions
• keep your receipts in order (i.e. use an app like Hubdoc)

 

5. Predict the future

Ok, so not predicting the future, but the next best thing–cash flow forecasting. Analyze your expected income and costs so you can plan for the coming weeks and months, meet your tax obligations, plan purchases, and estimate your working capital needs. 

Pro Tips:  

• consider whether you are forecasting for the short, medium, or long term
• regularly update cash flow forecasts to reflect changing circumstances
• analyze historical data to improve future cash flow
• implement cash flow forecasting tools that automatically fetch cash flow data
• hire a professional

 

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KEY TAKEAWAY

Improving cash flow isn’t just about making more money, it’s also about spending less and being organized. Both incoming and outgoing cash affects overall cash flow. When you aren’t making enough, cash flow becomes tight. If you continue to spend, even when income is down, expenses become too much. Staying ahead of your cash flow is crucial.

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