Every business depends on a consistent cash flow. One in four businesses won’t successfully make it through the first year of business, and more than half of startups will not make it to year five. With such a high failure rate, it is important to maintain a stable cash flow. Here are some ways to prevent a decline in your cycle.
Every business depends on a consistent cash flow. One in four businesses won’tsuccessfully make it through the first year of business, and more than half of startups will not make it to year five. With such a high failure rate, it isimportant to maintain a stable cash flow.
Here are some ways to prevent a decline in your cycle.
- Keep your books organized.
Keeping track of what goes in and what comes out is the core basis of cash flow. Make sure that you keep track of invoices and receipts to accountfor every transaction the company makes.
- Synchronize your payment terms.
Make customer payment deadlines compatible with your payment deadlines to vendors and suppliers. If your vendors and suppliers expect to be paid within30 days, require that your customers make their payments within 20 days. This will prevent deficits in the long run. Secure payments from customers ahead oftime so you can pay vendors and suppliers comfortably.
- Predict your cash flow.
Have your accounting department put together a prediction for when the company will have deficits and surpluses, then compare the predictions to youractual sales and expenses. For example, if you are a florist you could expect a surplus in February because of Valentine’s Day. Make a prediction of how muchyou will spend to prepare for the business surge in February and how much you will make in sales. Once February is over, compare your predictions to youractual numbers. This will help to identify expenses that may need to be cut or prices that may need to be changed.
Taking these easy steps, or considering some changes of your own, can help you keep atighter grip on your cash flow. The main idea is to not just to know your overall numbers, but to know the smaller transactions that make up thosenumbers. Many businesses make the mistake of acknowledging their numbers without knowing where they are coming from.
To learn more about tracking cash flow and avoiding a decline in profit,
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(516) 867-6752 or email@example.com.