Cash flow is one of the most important financial indicators for a company.
It is the total amount of cash flowing in and out of the company in a given period.
Cash flow management is essential to maintain the financial health of the company and ensure that it has enough cash to cover operational and financial needs.
In this article, we present 5 practical tips to improve your company's cash flow:
- Reduce fixed costs;
- Get paid on time;
- Increase sales;
- Manage inventories;
- Negotiate better terms with suppliers and customers,
Keep a clear and updated budget
To improve your cash flow it is essential to have a clear and updated budget of your income and expenses.
This way, you will be able to control your finances more effectively and know at all times what the economic situation of your business is.
It is recommended that you prepare this budget on a monthly basis and that you adjust it according to the changes that occur in your company.
In addition, it is important that you include both fixed and variable expenses, as well as the income from sales or services.
Don't forget about outstanding payments
One of the most common reasons for cash flow problems is the lack of follow-up on outstanding payments from customers.
If you have overdue invoices, it's important to chase them up and follow up regularly to make sure your customers pay you on time.
You can also offer early payment discounts or establish clear payment policies.
Control unnecessary expenses
Many times, unnecessary expenses can be the biggest cause of cash flow problems.
It is important to regularly review expenses and make sure they are all necessary and justifiable.
It is also important to look for ways to reduce costs by negotiating with suppliers or eliminating superfluous expenses.
Negotiate longer payment terms
One of the most effective ways to improve your cash flow is by negotiating longer payment terms with your suppliers.
This will allow you more time to pay your bills and temporarily improve your company's cash availability.
Explain your company's current financial situation and request an extension of payment terms.
Remember that the negotiation should be a win-win situation for both parties.
Your supplier may be willing to give you a longer term if you have a good business relationship and meet your commitments.
Make a projection of income and expenses
To maintain a healthy cash flow, it is important that you have a clear idea of your future income and expenses.
Make a projection for the next few months or even the next year, categorizing your income and expenses by type and date.
It is recommended that this projection be realistic and based on historical data or current market trends.
This will allow you to identify possible fluctuations in cash flow and take preventive measures to avoid liquidity problems.
It is also important that you update this projection regularly to have an up-to-date view of the financial situation of your business.
In this way, you will be able to anticipate potential problems and make more informed decisions about investments, payments to suppliers and other important aspects.
