The importance of cash flow can’t be stressed enough. As a trade service business owner, managing your finances probably doesn’t rank high on your to-do list. Focusing on a strong cash flow isn’t a top priority.
Let’s reverse that course of direction. That way, your business can stay in the black this upcoming holiday season and into the new year.
Here are some tips to help make managing your cash flow a little easier.
1. Keep Tabs on Your Accounts Receivable
The status of your accounts receivables can play a big role in your cash flow. Outstanding accounts receivables makes it look like you’re lower on cash than you actually are.
You can improve A/R by:
- Collecting payments on time.
- Tracking exactly how much you are owed.
- Knowing what is past due.
As long as you have a well-organized system for accounts receivables, you will be able to maintain a better cash flow and improve the functionality and return on investments for your business as an extra bonus.
2. Improve Your Invoice Process
Improving your invoice process = improving your A/R and inversely, improving your A/R = improving your invoice process. This is critical for the gains of any business. Improve by:
- Automating the process.
- Getting invoices to customers in their preferred way.
- Creating a way to track them easier.
Automation is getting simpler and more conducive every day thanks to data points and software updates. Look into the latest accounting software to take advantage of the newest features that automation provides. Invoicing has always been a necessity, but with automation, you are able to reduce human error and manual labor. As a result, your company gets its revenue in a more timely manner.
Overall, automation helps to ensure your invoicing is managed and organized with efficiency.
3. Review Your Vendors to Decrease Cash Flow
You’re likely using a vendor for something within your business. You’ve signed a contract and then shifted your focus back to running your business. However, it’s important to check back in with these contracts often. While reviewing, ask yourself:
- Can you find a cheaper option?
- Will they work with you to create a payment plan that’s in your favor?
- Would they be willing to cut you a deal?
Oftentimes, checking in with your vendors can result in savings, therefore improving your cash flow.
4. Track Cash Flow in Real-Time
Cash flow is a strong indicator of the success of your business and data gives you the information you need to track it effectively. When you track data in real-time, it will help you create cash flow reports that are up-to-date so you can make the best decisions for your business.
When you keep tabs on your cash flow, you’re able to make real-time adjustments and avoid dramatic dips or surges. This, in turn, gives you a good idea of where you stand at all times financially.
5. Create and Utilize a Cash Flow Forecast
A forecast gives you an idea of which direction your money is headed. If you’re on track with your cash flow forecast, great. If you’re off track, find out where and make adjustments.
This is the key place to determine whether your business is in the red or black, and tees you up to make necessary improvements to your bottom line.
6. Lean on Your Budget
Your budget is an overview of your expected expenses and as you know, expenses affect your cash flow. To get the best results, you’ll want to keep your expenses within your budget. To do this, you should conduct a budget analysis. This compares your budget to your actuals and will show you if you are overspending, so you can make adjustments to get your business back on track. If you’re within your budget, the budget analysis will give you the reassurance that you’re spending correctly.
7. Reassess Your Prices Often
The money you collect from your services is your main source of revenue. If your pricing is off, you won’t be maximizing your revenue. Take a look at your prices often to see if adjusting them is an option. This can improve cash flow and show you if what you are charging is still sustainable.
Read the latest industry literature and market reports to determine whether a change in price is really the right move. A pricing analysis takes into account the customers, market, and competitors to give you advice from every angle about a potential adjustment of price.
Bonus Tip: Work With an Experienced Accounting Partner
Why should you choose an experienced accounting partner to help you achieve cash flow success?
There are many benefits to hiring a third-party accounting service to handle cash flow and financial needs. You will be able to use an accounting firm like Argento CPA, to:
- Help you manage and improve cash flow.
- Work with you to create a strategy.
- Take your finances off your plate.
Contact Argento CPA to learn more about how we are able to improve your bookkeeping.