4 Best Practices for Managing Your Cashflow

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Whether you’re a start-up business or a big corporation, you should always put cashflow at the forefront of your focus. Cashflow is the lifeblood of a business and it sustains operations, employees and your products. If a start-up went through a funding round and received $3 million in investment, they would need to tightly track their cashflow. They’d need to make sure they were selling products or planning another funding round before they ran out of cash. This could put a halt to research and development and cause them to lay off their talented staff members. On the other side, established companies also need to manage their cashflow to stay financially flexible and provide them with growth opportunities. Let’s check out some of the best practices for managing your cashflow.

Keep a close eye on your cashflow

Checking on your cashflow regularly should become a habit. Monitoring it sporadically or only when it’s the end of a financial quarter simply isn’t good enough. Rather you need to pay attention daily or weekly and see if any areas that are causing your team financial strife.

Understand accounting fundamentals

Even if you’re not an accountant, it’s still important to understand the basics of accounting practices. Business owners and inventory managers alike are impacted by cashflow. This means they need to understand how to read and decipher balance sheets. Once you understand the main principles, you’ll be able to monitor your cashflow better and keep tabs on the health of your business. This will help you stay in the positive and manage problems before they spiral out of control.

Scale and grow strategically

Growing a business is exciting. If there is a demand for your product and momentum in the industry, it’s a great opportunity to scale your business and take advantage of the market. However, expanding a business takes money and this is where you need to make sure your growth spend and cashflow are going to align. The last thing you want to do is to expand your business but watch it come to a halt as your cashflow dries up.

Keep on top of invoicing

If you send out a large shipment of inventory stock to one of your suppliers, you need to make sure they are paying their invoice according to the terms and conditions. It is common for companies to have a window of time to pay the invoice, but it’s also common for companies to send payments late. The inventory stock you sent them has cost you money in production, storage and shipping. You need to ensure you receive the paid invoice back to cover all costs incurred from the inventory stock shipment and to keep your business operating with a healthy cashflow.

If suppliers fail to make payment on time once, that’s ok. However, if it’s a reoccurring theme, this could have serious implications to your cashflow. Stay on top of invoicing and keep in contact with the accounts departments in the companies you work with.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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