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The decision to start your own business is a big decision. You have to plan every aspect of your startup and manage your business finances. For a new entrepreneur, managing the cash flow properly can be a big worry.
Cash flow refers to the inflow and the outflow of money within your business. Managing cash flows is a big problem for startups. Here are a few tips to manage your cash flow.
Focus on the Cash Flow Stringently
While you might be busy focusing on business activities, do not ignore the cash flow. It is crucial that you keep an eye on the incoming and outgoing cash. It is necessary to maintain regular records of your cash flow in your bookkeeping. Missing out on one entry could lead to miscalculation of the funds available.
Maintain Emergency Reserve
Make sure you have kept aside a reserve of the cash for emergency expenses. There is no business which does not face a cash emergency at any point. It could be a small or big emergency. Having a reserve of cash will give you peace of mind in case you have to make immediate payments.
This is an important tip to consider. Accounts payable refers to the money you owe to others, and similarly, accounts receivable refers to the money others owe you. Keep a tab of the pending receivables and make sure you collect them on a timely basis. You could offer a discount to your clients in order to receive the money a little earlier which is also known as a rebate. Paying your pending payables on time saves you from the extra cost of attracting a penalty or interest rates.
Practice Smart Hiring
This does not directly affect your cash flow but has an indirect effect on it. Hiring manpower unnecessarily increases the number of employees you have to pay salary to. When the current manpower is sufficient to run your business, refrain from hiring more.
Do Not Over-stock
Before you plan on ordering raw materials, do an inventory control check. Make sure you need what you are ordering. If you already have stock of raw materials, do not order unnecessarily. A majority of your cash will be blocked in the stocks if you are unable to sell them quickly. Also, additional stocks will increase your warehousing costs, and there is always a possibility of wastage. Hence, you need to have a proper inventory control system in place to avoid any cash flow issues.
Take Technical Assistance
Maintaining your accounting ledgers has become much easier with the growing technology. Make use of technical accounting tools to ensure zero discrepancies. There are various free as well as paid tools available at your disposal. This will help you to keep a track on all your upcoming expenses and incomes. Thus, you can make the necessary arrangement of funds as and when the need arises without facing liquidity problem.
Taking tough yet smart decisions when it comes to managing your finance is the key. Making use of these easy tips, you can manage your cash flow better. To ensure smooth functioning of your business finance, maintaining proper records of your financial accounts is a must. To get assistance in managing your accounts, consider availing Edmonton bookkeeping services from a professional accountant.