Measuring your small company’s cash flow can be a tricky process. There are many factors to consider when making an accurate cash flow projection: identifying upcoming expenses, customers’ payment histories, improvements in capital, and many more.
Understand your cash on hand
The first step in making a projection is adding the amount of cash your small business has before a certain period of time, with the amount of cash you will have received from various sources by the end of the period.
Keep track of your expenses
Have a good sense of upcoming expenditures, including rent, payroll, inventory, benefits, equipment, supplies, equipment, and so on. As complicated as this process may be, it is crucial that you know where your business is heading in the near future.
Better manage your receivables
Improve the efficiency with which you get paid for your products. For example, you might offer a small discount to those clients who are able to pay their bills within a shorter amount of time, or you can request for clients to make deposits when they place their order for your products. Refuse to do business with people who take forever to pay, by enforcing a cash-on-delivery policy.
Better manage your payables
Just expanding sales is not guaranteed to help your small business become more successful. Instead, examine all your expenses and costs and decide what you can get rid of. Focus on flexible payment terms—rather than low prices—when deciding on a supplier. Beware when a supplier offers steep discounts, as you may end up paying more in overall costs in the long run. Also maintain good communication with suppliers, and keep them in the loop about your small business’s financial circumstances. A delayed payment once in a while will be more easily forgiven if the supplier knows your situation.