Managing cash flow effectively is crucial for the success of any business, big or small. At Together Business, we understand the challenges that businesses face, which is why we're committed to simplifying financial concepts and offering practical advice to help you navigate your finances with ease. In this article, we'll explore the second common cause of poor cash flow and provide actionable tips to improve your cash flow management.
The second common reason for poor cash flow is how and when money is spent, particularly in dealings with suppliers. Understanding this aspect of your business can make a significant difference in your financial health.
Setting Spending Limits:A good starting point is establishing a clear spending budget for your business. This budget should be created annually, preferably before the start of the new financial year. By setting spending limits and ensuring that authorised team members adhere to these limits, you can prevent overspending and maintain better control over your finances.Reviewing Accounts Payable Processes:Take a moment to review your Accounts Payable process, from the moment you place an order to when the payment is made. Documenting this process can help identify areas for improvement and streamline your payment procedures.Checking Supplier Terms:When was the last time you reviewed the terms of payment and prices from your suppliers? Understanding payment expectations, early payment discounts, and late payment penalties is crucial for effective cash flow management. By staying informed about your supplier terms, you can take advantage of discounts and avoid unnecessary expenses.Comparing Supplier Prices:Regularly comparing prices from different suppliers can help you ensure that you're getting the best value for your money. Consider not only the price but also factors such as delivery charges, payment terms, and discounts offered. This comparative analysis can inform your purchasing decisions and help you optimize your spending.Mitigating Risks and Building Relationships:In addition to managing cash flow, it's essential to mitigate risks such as fraud and human error. Implementing robust controls and building strong relationships with your suppliers can further safeguard your financial interests and foster long-term partnerships.
Effective cash flow management is essential for the financial health and sustainability of your business. By understanding how and when money is spent, reviewing supplier terms, and implementing best practices in accounts payable processes, you can improve your cash flow management and set your business up for success. At Together Business, we're here to support you every step of the way on your financial journey.
Schedule a Cashflow & Profit Improvement Meeting with us today to explore personalised solutions for your business.
