Between managing company finances, meeting taxation requirements and keeping your staff paid, as well as running a profitable and competitive business, managing a small business can certainly be a big job. It’s easy to get caught up in the day-to-day operations of the business and neglect your overarching responsibilities, but we must ensure we don’t fall into this trap, as this often leads to a downward spiral which can be impossible to recover from. Managing your cash flow properly will go a long way to helping you stay on top of the ongoing taxation and employee obligations in your capacity as director. As an accountant, you should be communicating regularly and clearly with your clients to ensure they fully understand their cash flow position and cash forecast for the next few months.
To help you improve your cash flow, the SR Group has prepared five tips to maximise your revenue and get the most out of your cash flow:
1. Ensure your records are accurate and up to date:
Maintaining accurate books and records is essential to maximising cash flow. As a director, it is your responsibility to be aware of the company’s financial position at any given time. It is therefore crucial to update your books regularly, which will, in turn, allow you to manage your business using timely information.
2. Put a Focus on Accounting:
Accounting is essential to the maintenance of proper records. Whether you outsource your accounting, have a dedicated accounts manager or set aside a couple of hours each week and take care of the books yourself, it is essential that accounting is given proper attention each and every week.
3. Chase up Invoices in a Timely Manner:
Without receiving the money, recorded revenue is just numbers on a page. Up to date books allow you to monitor your accounts receivable at all times, and it important to chase up outstanding payments promptly, as their likelihood of being paid reduces significantly as time goes on. A polite but firm invoicing and reminder strategy can go a long away in maximising collectibles.
4. Keep Business and Personal Finances Separate:
This is a vital but often overlooked recommendation for many directors. Mixing your business and personal finances adds an unnecessary level of complication to your business and can have disastrous results on you as an individual should your business face hardship. Having separate finances will allow you to properly pay yourself –something many directors struggle with – and reinvest surplus cash to strengthen and grow the operations of your business.
5. Build Cash Reserves
Business, just like life, is uncertain. There will be periods of prosperity, but there will also be times where cash is scarce. A cash reserve can act as your safety cushion for when you experience hardship and prevent unexpected events from derailing your business. Cash reserves can also allow you to finance your own projects and/or expansion and avoid borrowing from banks and other lenders on their terms.
Running a small business is a never-ending job. But with a defined and competent cash flow strategy, this job becomes a little bit easier and will help you get the most out of your business.
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