10 tips for managing your cashflow


by Dave Leaman, Business Finance Advisor

Piggy bank - managing cashflowCashflow forecasting is critical when starting your business as it will ensure you stay on top of your finances and avoid running into the red. You should compare cashflow forecasts (where money is coming from and where it will be spent in the future) against cashflow statements (where money has come from and where it has been spent in the recent past) on a regular basis and analyse where and why there is a difference.

Lack of cash is the one of the main reasons for business failure so here are some tips to make sure you keep control of your cashflow:

1.  Make sure you issue invoices as soon as the product or service has been delivered. You should specify the payment terms of 14/18/30 days and keep a diary or database to record due dates for payments.

2.  Chase the people who owe you money. Although they may be an important customer, they will not be a customer if your business fails due to lack of cash.

3.  Don’t pay your own invoices until they are due, but make sure you do pay on the due date to establish a good credit rating and avoid any penalties.

4.  Try to keep accurate daily records of all expenditures and transactions in order to know exactly where you are financially. This makes it easy to identify shortfalls before they happen.

5. Keep a cash book and record money that’s paid into your bank account, when it is cleared and any money thats paid out.

6. Regularly reconcile your bank account. Check bank statements for the clearance of funds and identify any errors or non-payments so that you can address queries in a timely manner. Does this tie in with your own accounts and, if not, why?

7. Forecast for payment of costs. Remember, the money in your account is not yours until invoices have

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