5 Tips to Better Manage Your Cash Flow
It seems straightforward: Your business or nonprofit needs to know what you owe others and what they owe you. That’s your cash flow, and managing that cash flow accurately and consistently is one of the basic elements of accounting.
Look more closely at cash flow management, and you’ll find that it’s not so simple. As with every accounting process, there are good and bad ways to go about it. There are processes that work well and others that will cause you trouble—if not today then down the line. There are also advanced elements that can help separate your organization from the competition.
Let’s look at five tips for managing your cash flow not only to get by but to be more efficient and productive.
Step 1: Establish firm collections practices
When do your clients or customers pay you? If your answer is “it depends” or “it’s a long story,” you probably need to strengthen your accounts payable practices. Make sure your policies are clear, and make sure someone is keeping an eye on receivables—you might want to assign a single person to the task. That person should contact customers if they are late with payments, and persist as necessary to collect all your receivables as quickly as possible.
Step 2: Pay on time, but not early
It’s good business to pay your bills on time, every time, but that doesn’t mean you should pay a large bill the day you receive it. Check the payment terms—net 30, net 90? Then establish a process to ensure the bill is paid toward the end of the available term. This is assuming, of course, that you have cash on hand to pay the bill—if you don’t, that’s a more serious cash flow problem than the ones we’re addressing.
Step 3: Invest in the right software
Especially as your organization grows, it’s wise to invest in advanced accounting solutions such as Sage Intacct, the best-in-class cloud ERP platform. Sage Intacct’s cash flow management software provides a complete picture of your cash position on a secure, customizable dashboard accessible from anywhere. You can view all payments and all transactions across bank accounts and credit cards, and across every location and entity—and it’s ready for you in real time.
Step 4: Forecast your future
Look for accounting software that offers predictive forecasting capabilities, which provide access to accurate, automated cash flow forecasting across your entire organization, at the click of a button. The best solutions can generate models of your projected revenues and expenses related to sales, capital investments, and other information. The result is a crystal ball of sorts—a comprehensive picture of what lies ahead so you can better manage your cash flow.
Improve cash flow management
Better cash flow management processes can help you grow your organization with confidence. Insero & Co. helps organizations evaluate best-in-class software solutions to streamline cash flow management and other accounting practices.