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Running a small business can be tough. You’re often walking a tightrope, trying to keep everything in balance. Small businesses are often close to failing. To deal with uncertainty, it’s important to have the right info to handle any situation. Understanding cash flow, and how money moves in and out for your business operations can help business owners make a smart cash flow plan to keep the business running smoothly.
Building a cash flow plan
Begin by conducting a thorough assessment of your business’s current financial position. Review your past financial statements, including income statements, balance sheets, and cash flow statements, to identify trends, patterns, and areas requiring attention. This analysis serves as the foundation for developing your cash flow plan. After the analysis, follow the steps below.
Set SMART Financial Goals
Once you have a clear picture of your financial position, the next step is to set SMART financial goals for your business. SMART goals are specific, measurable, achievable, relevant, and time bound. Whether your objectives revolve around increasing revenue, improving profit margins, or building cash reserves, setting clear and actionable goals directs your cash flow strategy. By defining precise targets and timelines, you can track your progress and stay focused on achieving your financial milestones.
Analyze cash flow trends
Understanding the patterns and fluctuations in your cash flow is critical for effective cash flow management. With Forwardly’s free cash flow forecasting tool, you can gain valuable insights into your cash flow patterns and fluctuations.
By analyzing historical cash flow data, you can identify trends, seasonal variations, and potential cash flow cycles that impact your business’s liquidity. This insight lets you anticipate peak and low cash flow periods, allowing you to plan accordingly to maintain financial stability. Whether it’s adjusting inventory levels, timing expenses, or managing receivables and payables, a deep understanding of cash flow trends empowers you to make informed decisions that optimize your business’s cash flow position.
Monitor your accounts receivable
Accounts receivable management plays a crucial role in maintaining healthy cash flow for your business. Using efficient invoicing and following up on overdue payments are key. Sometimes, slow payment options like using checks or credit cards can delay the payments. Did you know that statistics show that 54% of SMEs experience late payments, with an average delay of 6 days? 20% of invoices are two weeks overdue, while 33% take more than a month, and 20% take sixty days or more. With Forwardly’s instant payments, you can avoid becoming a part of these statistics and keep your cash flowing smoothly.
You can bid farewell to these delays and receive payments directly into your bank account hassle-free, all in just 60 seconds. By offering instant payment options and early payment discounts, you can encourage your customers to settle their bills sooner, giving your cash flow an extra boost.
Manage your accounts payable
Effectively managing the accounts payable process is equally important for maintaining positive cash flow. By carefully managing your outgoing business payments to your vendors, and creditors you can optimize cash flow and preserve working capital. Prioritizing payments based on due dates, negotiating favorable terms with suppliers, and leveraging payment extensions when feasible are effective strategies for managing accounts payable while maximizing cash flow.
Forwardly offers a seamless solution with no monthly subscription fees, helping you retain funds in your account longer at no additional cost. With one-click bill payments processed in just 60 seconds, Forwardly eliminates the need for pre-funding wallets or transferring money to new bank accounts.
Identify potential risks
Now, let’s talk about risks. They’re part and parcel of business but being prepared is half the battle. Identifying potential risks that could impact n your cash flow is essential for proactive risk management. Whether it’s late payments from vendors, unexpected expenses, or economic downturns, anticipating these risks allows you to develop contingency plans and mitigation strategies. Conduct a thorough risk assessment, identify potential vulnerabilities, and create strategies to mitigate their impact on your business’s financial health.
Calculate net cash flow
At the heart of every cash flow strategy lies the calculation of net cash flow—the difference between total cash inflows and outflows. Calculating net cash flow provides a clear snapshot of your business’s cash position and liquidity. Monitor your net cash flow regularly, track performance against your financial goals, and make informed decisions to optimize cash flow management strategies. By keeping a close eye on your net cash flow, you can identify areas for improvement, implement corrective measures, and steer your business toward sustained growth and profitability.
Take control with Forwardly
If you’re ready to take control of your cash flow, give Forwardly a try. We’re here to offer you a free cash flow forecasting tool that’ll help you stay ahead of the game. With our seamless payment solution, you can say goodbye to payment delays and get paid in just 22 seconds and that too at a fraction of the cost of what you are paying right now. Forwardly comes with no monthly subscription fees, free bill payments and free same-day ACH payments.
Don’t let cash flow woes hold your business back. Take the plunge and sign up with Forwardly today. It could be one of the best decisions you’ll ever make for your business.
