How To Improve Cash Flow
Tracking financial metrics for your business is really important. The cash flow of your business is one of the most important metrics to track, sometimes more important than day-to-day profitability.
Why Cash Flow Is So Important
Making a profit in business is important, but the cash you have on hand impacts if you can operate the business day-to-day at all. If you don’t have cash for payroll and other expenses, your business can grind to a halt.
While you may be making a profit on the sale of your products and services when considering the expense to produce those products or services, if you don’t have cash to pay your day-to-day expenses, then that profit may not help you. Considering this, it’s important to manage cash flow carefully.
Cash Flow Factors And How To Manage Cash Flow
Depending on your specific business, there are a number of different things that can impact cash flow and that should be considered to manage cash flow carefully.
- For example, if your business has to purchase equipment to do business, then this is something that can impact your cash flow significantly. Rather than paying up front for the entire purchase, consider leasing equipment so that the cash expense is spread out evenly over a longer period of time rather than all at once.
- If you run an inventory based business, make sure you have great inventory level tracking available.
- By tracking how quickly you are selling inventory, you will know when you need to purchase new inventory, and also be able to see if certain inventory is not selling well and needs to be liquidated to convert it back into cash.
- If you anticipate needing more inventory and have good systems for tracking past performance, you may be able to get financing to purchase that inventory.
- This means you will not need to pay all cash for inventory, which conserves that cash for other expenses.
QuickBooks Features To Manage Cash Flow
There are a number of features in QuickBooks that you can use to help you manage cash flow.
- If your business invoices customers for services or products and collects payment at a later time, you can use the “Collections” feature of QuickBooks to manage this process.
- You can use “Invoice Reminders” to remind customers of their open invoices, “Accounts Receivable Aging Reports” to track which invoices have not been paid, and for what length of time, and also use “Collection Software and Services” to manage the communication process with software and services that integrate with QuickBooks.
- If you run an inventory based business, you can use QuickBooks’ inventory tracking features. For example, you could do periodic manual accounts of inventory to make sure the data within QuickBooks is kept accurate and up-to-date and then run reports to see what you should do with certain inventory.
- Using these reports, you will be able to see how quickly inventory is selling and which inventory needs to be liquidated.
We Can Help You
If you need help getting cash flow management best practices in place in your business or other financial management support, contact Bernard today.
Listen to Bernard discuss improving cash flow despite a slow period.
