Accounting Tips to Improve Cash Flow for Small Business

Cash Flow Management to Minimize and Maximize Cash Movements

Managing Cash Flow is the heart of the business. Managing the inflows and outflows of cash should be prioritized by small businesses in order to survive. The movements of cash as they affect receipts, disbursements, liquidity and working capital of the business should be dealt with caution and constant planning. How does small business manage cash flow? What are some ways to maximize cash inflows and minimize outflows?

There are Accounting Tips that will help Small Businesses to improve Cash Flow and among them are discussed below:

Create Cash Budget and Forecast

Creating Budget or Forecast can help improve cash flow. Cash Budget may be done on a monthly basis. Cash Budget can be categorized according to receipts and disbursements. Actual Cash Flow is generated to compare actual versus budget. Variance Explanations are then identified to know the reasons why some disbursements are incurred instead of what was initially budgeted. The Statement of Cash Flow can be generated for the actual spending versus budget to easily compare figures.

Cash Forecast is helpful to identify capital expenditure especially for future projects which may involve major cash outflow. In this manner, business owner will be able to schedule appropriate funding and obtain specific ways to increase sales and cash receipts to meet the specific schedule.

Improve Billing Cycle

When preparing invoices to customers, business owners should make sure that transmittal of billing whether through email or courier should be promptly done in order to avoid the delay in the receipt of collection. Statement of Accounts and Billing Statements should be frequently sent on a monthly basis to remind clients on due dates. Overdue accounts should be appropriately monitored to minimize bad debts and write off of Receivables.

Maximize Payment Terms

When preparing payments to suppliers, business owners should see to it that credit payment terms are maximized. Delaying of payments can also be done only if there are no penalties involved and customer-supplier relationship should not be compromised.

Manage and Control Expenses

Expenses should be appropriately monitored because these play vital roles in cash movements. Establish cost-benefit analysis when purchasing items. Canvass prices from different suppliers and compare them with each other without compromising quality.

Hire Reliable Bookkeeper or Accountant

Having an Accounting Background is an advantage when establishing a business; but hiring a bookkeeper and an Accountant is more beneficial in order to understand more about the process and the status of the business. A reliable bookkeeper and Accountant enable to explain and suggest more options to maximize profit and improve working capital through managing Cash Flow.

Establish Reliable Accounting Software

There are available versions of Accounting Software that provide tools for Cash Management. The To-Do features remind the bookkeeper on specific payment due dates and overdue invoices. Online Banking Features of Accounting Software determine the current value of Cash deposited in Bank. The cash inflows and outflows are updated to ensure updated balance and to minimize bank surcharges due to bank overdraft. The right Accounting Software enables the bookkeeper to properly and effectively managed different accounts as these relate to the movement of Cash.

Cash flow is maximized when profitability is managed to increase available cash on hand and in bank. Cash flow is minimized when all possible resources are acquired at the least cost and at the highest quality. Small Business should see to it that adequate knowledge on the movements of cash enables business owners to establish guidelines on Cash Control and Handling to avoid possible theft. Cash flow is all about monitoring. The Accounting Tips to Improve Cash Flow will be attained with proper Cash Monitoring. Expenses when controlled are minimized. Profitability is maximized when Receivables are adequately collected. Thus, Cash flow management is attained when Cash Outflows are minimized and Cash Inflows are maximized.

Jason is a IT expert with a background of business administration. He is writing about how to improve SME business processes in Singapore by using business software like?accounting software, payroll, leave and time and attendance software.

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