It is crucial to keep track of your cash flow.
Whether it’s personal finances, or in business, cash flow is a key part of keeping your business viable. If you spend, spend, spend and don’t have the money coming in to cover this expenditure, it’s belly up or borrow time.
Most companies have quiet times during the month, so it’s important to forecast what you’re receiving and what you’ll need to pay out. A two to three-month projection of cash flow will help you identify any shortfalls, juggle the odd payment date if necessary and provide a much clearer view of your finances.
Keeping on top of aged debtors, or customers who have a history of paying late becomes vital if you’re experiencing a cash shortfall. As does ensuring you can afford purchases when you need them, rather than risking delays of another month or two.
If you’re keeping a running spreadsheet or similar app, it is important to ensure it’s accurate. One missed tax return can mean an awful lot of money to be found at the last minute. You’ll also be able to see when you need to put money aside for surprises or large expenses.
A little discipline in keeping your cash flow maintained should give you a much clearer view of accounting liquidity, as well as the ability to plan for future growth.
Here’s some information about cash flow you might find useful:
What is cashflow management?