5 tips to improve your cash flow

5 tips to improve your cash flow

Growing costs money. An enterprise needs financing if it wants to introduce new products, want new markets or simply needs working capital. Own resources often fail, so companies need to rely on external financiers. Not easy. How do you prevent capital needs from hindering your company’s growth? Cash flow .

Cash flow : Cash flow in Dutch. A term from the business economy that aims at the flow of cash and cash equivalents of an enterprise. Fast-growing companies need to make a lot of money to finance the growth of the company. The cost is preceded by the profit, which usually results in a large financing gap. In the beginning, this is often still possible with own money or family and friends. But when it gets serious, more money is needed.

Why is cash flow so important?

A financier will initially look at the cash flow. How much money does it take and how much does it go? Indeed, the cash flow will pay the current liabilities: interest rates and repayments of loans, as well as the remaining monthly recurring costs. Good insight and improvement of your cash flow is therefore crucial to your business. You can take a number of things to improve your cash flow. Here are 5 tips to keep more money in your business.

5 tips for better cash flow

1. Make sure your debtor management is in order
The most important thing is to make sure your customers pay on time. Every penny that enters leads to a more positive cash flow. It is therefore mainly about debt management and good credit management in the broader sense. Make good arrangements with your customers, even during the sales process. This prevents invoices from being paid late or not on time and you act as a customer’s financier.

2. Create a cash flow
planning Make a schedule and a forecast of future revenue and expenses. There are software programs available on the market, but this can of course also be in a spreadsheet. The most important thing is to understand the monthly income and expenses. For example, you can better make big purchases that break a hole in working capital.

3. Maintain a good contact with the bank
Make sure you have a good contact with your home banker and do not put it in unpleasant surprises. Often the bank is inclined to think about alternative funding if they are well aware of your situation. She usually also has a great experience at home that you can benefit from. Do not see the bank as an enemy, but as a party that has knowledge and expertise to meet your funding needs. Banks have received a lot of criticism in recent years, but they do not mean that they do not play any part in SME financing.

4. Pay attention to your own payment behavior
It is of utmost importance that your customers pay on time. But you should also keep an eye on your own payment behavior. Create a priority list with the most strategic payments such as wages and taxes. Only deal with discounts if you can miss the money. If you are an important customer for a vendor, you may be able to negotiate better payment terms.

5. Do not use your cash money for personal purposes.
Maybe an unnecessary tip: do not purchase personal items with cash from the company’s cash register. It gives a distorted picture of your financial situation and a wrong signal to your employees.

Most importantly, you have a good overview of your balance of payments. Know when and how much money goes in and out, so you will not face any negative surprises.

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