Cash flow is king
Pay your bills on time and manage the purchase of supplies and equipment you need with effective cash flow management.
The survival of any business depends on cash – making cash flow the lifeblood of your business. Even if your business makes a healthy profit at the end of the year, you still need to manage the inflow and outflow of cash to survive on a day-to-day basis.
Managing cash flow effectively will help your business to pay its bills on time, purchase the supplies and equipment it needs, and survive long-term.
It's important to find out in advance the months when your business is likely to be short of cash. Then you can plan ahead and minimize the impact of cash flow problems.
Cash flow forecasting tools are great for tracking when and from where your business will receive cash - and how and when the cash will need to be spent. Forecast your business's cash needs for the next six or 12 months.
Once you know how much cash you'll need and when there are likely to be shortfalls, it's time to improve your cash flow.
Manage accounts receivable proactively in order to improve your cash flow and minimize write-offs of bad debts. Some ways to enhance the management of your accounts receivable process include:
Your cash flow will improve if you also manage your accounts payable process effectively in the following ways. Aim to:
Depending on the nature of your business, there are several other ways to improve cash flow, which include:
Whenever you have excess cash in your business account, transfer it to either a business savings account or a business investment account.
A business savings account allows you to earn interest on even small amounts of surplus cash. Scotiabank's Money Master for business savings account doesn't require you to maintain a minimum balance and gives you instant access to your cash, if you need it.
It’s ideal for businesses that have a relatively small amount of cash to save on an irregular basis.
On the road to growth in profits, cash flow is king. Healthy cash flow will enable you to rent your business premises, pay your staff salaries, and meet all your commitments.
Surplus cash will help your business to thrive on a long-term basis and provide a safety net for the months when your cash outflow exceeds your inflow.