Cash flow is one of the most crucial aspects of a small business. According to a recent study, a small business usually spends an average of 12 work days per year chasing unpaid invoices. This often leads to cash flow problems and affects business operations.
Stay on top of your business accounting by improving your cash flow. Consider using cloud accounting services and tools like the Xero accounting software. This will help you keep track of your ongoing expenses in a more organized way, and thus improve the cash flow of your business. Take a look at the below tips on how to improve cash flow.
A recent study by PricewaterhouseCoopers (PwC) says that about 85 percent of the reasons given by customers for non-payments are invoice related queries. Hence, it is extremely vital for a small businesses to get the invoicing done accurately. Double-check everything to make sure that you have entered the right amount, name, and address in the invoice. Also, invoice should never be delayed as it could hamper the usual cash collection process. Using Xero accounting software will be helpful, because it would help auto-generate the invoices.
Make a good forecast
Very often small businesses fail to deal with sudden financial emergencies or requirements. Hence, it is crucial to perform a good forecast of where its cash flow is likely to move in future and also to have a clear picture of its current financial status. For small businesses, making a forecast isn’t very difficult. They can map their finances on a weekly, monthly, or quarterly basis, using cloud accounting services or tools. This will give them a clear idea of when a surge is likely to happen or when a drought can occur. They can then prepare accordingly.
With all the accounting mistakes that small businesses commonly make, automating the entire accounting system by using Xero accounting software will be really helpful. This cloud-based software operates on the internet and can help in keeping track of bills, issuing invoices and taking payments. It can also see the cash position of the business and other related vital factors from any computer system. Automated systems can also be used for allowing customers to make payments conveniently. This can be done through the ‘pay now’ option from the invoice or by sending automated reminders to the customers when a payment is due.
Consider debt chasing
Debt recovery and credit control are essential parts of a solid cash flow system. According to a recent study by PwC, about one in five businesses said that failure to collect outstanding bills is their biggest setback. Long standing unpaid bills become extremely hard to collect. Hence, it is necessary to chase debt payments on a regular basis. With cloud accounting services, you can keep track of your outstanding bills and get your cash flow back on track.
Know your customers
Knowing your customers is also crucial in improving your cash flow. For example, you should know how the payment cycle of each customer usually works and how to contact them in case of any payment defaults. This will help you follow up with your customer for payments more conveniently. Also, developing a good business relationship with customers would help resolve several problems amicably.