How To Prevent A Cash Flow Crisis

It is important for every business to understand and apply cash flow statement. It is defined as the listing of cash that goes in and out of a company. Unless basic understanding and training back you, you will be highly confused and your business is just as good as dead. Problems in cash flow analysis are encountered quite often especially in small businesses. That is because they hardly have any experience, training or perhaps even a plan. In order to pull through from all of this disaster, here are some of the best tips that will help you:

Make All Necessary Payments

This process involves making a list of every single payment for the next couple of months. Keep a really good check on all of the things that you need to let off before you are faced with any more penalties. Get greater importance to payroll. If you can convince them that you can pay you rent late, then do so. Subcontractors will be able to be a little more lenient with you and wait a little longer.

Give An Early Invoice

The administrative side of you cash flow analysis may be delayed but never you invoices. These usually are paid for by the time they are given out. If you are sending invoices late for let’s say, a week, you are merely delaying receipts by a week. If the average receipt amount you receive is like $8000, the net result will be less than that of $8000. Another example would be is that if you send those invoices like 8 days late, it will drop about $8000 of working capital on you in order to run your business.

Get Ahead Of Your Collections

You may contact customers who are overdue on their payments, or are due soon. It will better help your cash flow analysis if you can ask customers to toss in their pay sooner rather than later. By paying early, they will be spared about a fraction of the overdue amount, say 15 percent less than overdue. Maintain a good relationship with your customers and do not rely on a collection agency to go seek receivables of which you may never see again.

Put Discounts On Invoices

Understand how much it is going to cost you if you are sending out invoices faster. There are some policies that allow discounts for early invoices. However, your cash flow analysis could face a devastating blow if your superiors take many of these discounts as a hint for more cash.