12 Tips On How To Control Cash Flow

Allison S Robinson | 19 April 2022 | 2 years ago

how to control cash flow

No one ever said that being a business owner was easy, and managing your cash flow is one of the biggest challenges you will face. Unfortunately, many businesses fail because even though they are experts in their field, they don’t know how to control cash flow effectively. Without proper cash flow management, your business can quickly find itself in a difficult situation where it’s struggling to pay its bills on time and ends up folding under financial pressure.

In this blog post, we will discuss 12 tips for successfully managing cash flow in your business. Following these tips will help keep your business running smoothly and ensure that you don’t fall behind on any payments.

Tip #01: Keep Close Track of Cash Flow

The first and most important tip is to keep close track of your cash flow at all times. This means having a clear understanding of how much money is coming in and going out of your business on a daily, weekly, or monthly basis. There are various software programs and apps that can help you track your cash flow, so find one that works best for you and make sure to use it religiously.

Tracking cash flow requires more than just knowing how much money is coming in and going out, however. You also need to be aware of when payments are due and what kind of expenses you can expect in the future. This will help you better plan for upcoming costs and make sure that you have enough cash on hand to cover them. Many businesses fail because they don’t track their cash flow properly and are caught off guard by unexpected expenses.

Tip #02: Identify and Cut Unnecessary Costs

One of the quickest ways to improve your business’s cash flow is by identifying areas where you can cut costs. This could involve anything from negotiating better rates with suppliers to cutting down on unnecessary expenses. Take a close look at your business’s budget and see where you can make some adjustments.

Some common costs that successful businesses cut or successfully reduce are:

  • Rent – If your business is based in an office or retail space, see if you can negotiate a lower rent price with your landlord. If not, look into moving to a smaller or less expensive location.
  • Employee Salaries – Evaluate your employees and see if there are any positions that could be eliminated or replaced with someone who would be willing to work for less.
  • Travel – If your business requires a lot of travel, see if there are any ways to cut down on costs, such as flying economy class or staying in cheaper hotels.
  • Insurance – Shop around and compare rates from different providers to make sure you’re getting the best deal on insurance for your business.
  • Taxes – Hire an accountant to help you take advantage of any tax breaks or deductions that your business may be eligible for.
Of course, there are some costs that you can’t eliminate entirely, but every little bit helps. Reducing your expenses wherever possible will help to free up more cash flow and give you some breathing room in your budget.

utilise your business assets

Tip #03: Utilise Your Business’ Assets

If your business has any assets, such as property or equipment, you can utilise them to improve your cash flow. For example, you could rent out unused space in your office or lease out equipment that you’re not using.

There may be some assets that you are able to liquidate altogether. This means selling them for cash that can be used to cover expenses or pay off debts. However, you should only do this as a last resort as it may negatively impact your business in the long run.

The important thing is to make sure that you’re getting the most value out of your assets. If you’re not using them, there’s no reason why they should just be sitting around gathering dust. Utilising your assets can be a great way to generate additional income and improve your business’ cash flow.

Tip #04: Set Up a Line of Credit

Another helpful tip is to set up a line of credit with your bank. This will give you access to additional funds when needed and can help tide you over during periods of low cash flow. Just be sure to only borrow what you need and to keep up with your repayments.

When choosing a line of credit, there are many important factors to consider. These include:

  • The interest rate – Look for a line of credit with a low interest rate to save on costs.
  • The repayment terms – Choose a line of credit with flexible repayment terms that suit your needs.
  • The credit limit – Make sure the credit limit is high enough to cover your expenses but not so high that you’re tempted to overspend.
  • The fees and charges – Some lines of credit come with annual fees or other charges. Make sure you’re aware of all the fees before you apply.
Businesses that use lines of credit most successfully are those that have a plan in place for how they will use the funds and make repayments. Make sure you shop around and compare different lines of credit before making a decision. Once you’ve found one that meets your needs, be sure to use it wisely and only borrow what you can afford to repay.

Tip #05: Lease Resources and Important Equipment

Instead of buying resources and equipment outright, consider leasing them instead. This will help you free up some cash that can be used for other purposes. Just be sure to shop around for the best deals and to read the fine print before signing any contracts.

Of course, it depends what industry you are in but some of the most common items that businesses lease include:

  • Computers and other office equipment
  • Vehicles
  • Manufacturing equipment
Leasing can be a great way to get the resources and equipment you need without having to make a large upfront investment. However, it’s important to remember that you will still be responsible for making regular payments on the lease. This needs to be factored into your budget and cash flow planning. Just be sure to compare different deals and to only sign a lease if it’s beneficial for your business.

Tip #06: Organise Your Invoices

One common cause of late payments is disorganised invoices. Make sure that all of your invoices are organised and up to date so that your clients can easily find them and make the payment on time. You might also want to consider setting up automatic invoice reminders so that your clients are reminded to pay on time.

Some clients and customers deliberately delay payment in the hope that they will get a discount or be able to negotiate a better deal. While this can be frustrating, it’s important to remember that you have rights as a business owner and there are things you can do to protect yourself.

One of the best ways to avoid late payments is to clearly state your payment terms on all invoices. This way, there can be no confusion about when payment is due and what the consequences are for late payment.

offer sales incentives

Tip #07: Offer Incentives for Quick Sales

If you’re struggling to get customers to pay on time, consider offering them an incentive for doing so. This could be a discount on their next purchase or a freebie if they pay within a certain timeframe.

The important thing is to make sure that the incentive is something that will actually benefit your business. Offering a discount on future purchases might not be ideal if you’re already struggling to make ends meet. Look at your sales patterns and margins to see what would work best for you.

Tip #08: Manage Your Stock Levels

If you have inventory, it’s important to manage your stock levels carefully. Having too much stock can tie up a lot of cash that could be used for other purposes, so only order what you need and keep an eye on your sales patterns.

The businesses that are most adept at managing stock levels are those that have a good understanding of their sales patterns and what their customers want. They use this information to forecast future sales and to order stock accordingly.

Tip #09: Utilise Modern Payment Channels

In today’s day and age, there are many different payment channels that you can utilise to receive payments quickly and efficiently. This could involve anything from setting up online payments to using a mobile app for invoicing. Find what works best for your business and make use of it.

If you have an e-commerce store or you take a lot of online payments, you also need to be aware of fraud risks. Be sure to put in place adequate security measures to protect your business and your customers’ data or you could end up losing a lot of money and taking a serious hit to your reputation.

Tip #010: Request Deposits/Advanced Partial Payments

Another helpful tip is to request deposits or advanced partial payments from your customers. This will help you to receive at least some of the payment upfront so that you’re not left out of pocket if the customer decides to cancel their order.

Upfront deposits and partial payments are particularly important for businesses that provide customised products or services or high-ticket items. This ensures that you’re not left out of pocket if the customer changes their mind or is unable to make the full payment.

Tip #011: Use Business Credit Cards

If your business has a good credit rating, you could benefit from using a business credit card. This can be a useful tool for managing cash flow as you can use it to make purchases and then pay off the balance over time. Just be sure to keep up with your repayments and don’t spend more than you can afford.

When choosing a business card there are various important factors to consider. These include:

  • The interest rate – This is the amount you’ll be charged for borrowing money on the card. Look for a card with a low interest rate so that you don’t end up paying more than you have to.
  • The credit limit – This is the maximum amount you’re able to spend on the card. Choose a limit that’s appropriate for your business needs and make sure you don’t exceed it.
  • The rewards program – Some business credit cards come with rewards programs that offer points or cashback on your purchases. If you travel frequently for business, look for a card that offers rewards such as air miles.
  • The annual fee – This is the amount you’ll be charged for using the card each year. Some cards have no annual fee while others can charge up to a few hundred pounds a year.
The important thing to remember is that a credit card is not free money but if used wisely, it can be a helpful tool for managing cash flow and expenses.

hire an accountant

Tip #012: Hire an Accountant

Hiring an accountant is also a great way to manage cash flow in your business. They can help you to keep track of your finances and make sure that all of your payments are up to date. This will give you one less thing to worry about and will free up your time so that you can focus on running your business.

When choosing an accountant, be sure to shop around and compare different services. You should also check that they’re qualified and have experience in dealing with businesses like yours. You can hire an accountant on retainer or on a project basis, depending on your needs.

Final Thoughts

Knowing how to control cash flow is vital for any business, yet so many businesses fail to do so effectively. By following the tips above, you can give your business the best chance of success. Just remember to stay on top of your finances and to always be prepared for unexpected expenses. With a little bit of planning, you can ensure that your business has a healthy cash flow and is able to weather any storms that come its way.



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