There are many reasons I’ve learned about why you should know how to manage your cash flow flawlessly. Of all the businesses that fail, 82% fail because of cash flow problems. That was never something I wanted to deal with, but I can promise you that, like most entrepreneurs, cash flow was almost my downfall.
So, with that in mind, I’ll talk you through some of my cash flow management tips as an entrepreneur.
Know Your Cash Flow Cycle
Do you know your cash flow cycle? One study I read said only 45% of business owners review their cash flow statements. No wonder 82% of businesses fail.
Your cash flow cycle is essentially how cash flows in and out of the business. More technically speaking, my cash flow cycle would be how long it takes to turn investments in stock, marketing, etc, into cash flow from sales.
How I Do It
Monitor Inflows and Outflows: I record all the money coming in (sales revenue) and going out (expenses, taxes, loan repayments).
Study Patterns: I analyse my cash flow patterns for past periods to forecast future highs and lows. That helps me prepare earlier and avoid getting caught off guard.
Make adjustments: I revise my budget or spending as needed. For example, if there tends to be a decline in income during particular seasons, I cut back on expenditure. Still, I know business is pretty much unpredictable.
Speed Up Payments For a Better Customer Experience – A Case Study from iGaming
Customers want fast payouts if I owe them something – that will always be true. Apart from being great for my books, faster payments can significantly boost the customer experience. Quick transactions make everyone happy, and suppliers get their money early enough while purchasers receive goods promptly, creating an atmosphere of trust.
Take casinos, for example. Speed matters. Instant payouts have grown incredibly popular, particularly in recent years as we grow more and more accustomed to instantaneous online experiences. 5G and other technologies that speed up and streamline experiences mean that the speed at which payouts are made represents a key focus for review websites. For instance, askgamblers.com regularly update their rankings of fast payout casinos.
How I Do It
Automate Payments: To eliminate delays caused by human error or forgetfulness, I use software that processes payments automatically whenever they are due. There are probably hundreds available now; it isn’t tricky to find a good one.
Provide More Payment Options: The greater the variety of payment methods available, the easier and quicker clients settle their bills with me. Think PayPal, Visa, Mastercard, eWallets, etc.
Be Clear in Communication: I always let my customers know when exactly they should expect their payments. That also helps avoid misunderstandings.
Keep an Eye on Your Invoices and What People Owe
Monitoring invoices and the money people owe my company is a must. Having unpaid invoices can choke your cash flow and make it tricky to cater for expenses or invest in growth.
How I Do It
Set Specific Payment Terms: Before working with a customer, I agree on clear payment deadlines – within 30 days is a good rule of thumb I like to follow.
Follow Up Quickly: I don’t hesitate to remind someone about an overdue bill. Sending out automated reminders at regular intervals usually prompts action from debtors. Sometimes, people forget – we’re all human.
Encourage Early Settlements through Incentives: To speed up cash inflows, I offer discounts or other rewards to those customers willing to pay before the due date. Trust me, you can never go wrong with offering a discount.
Control What You Spend
Spending control is essential. Unchecked expenses can deplete funds rapidly, causing all operations within my business to grind to a halt due to a lack of sufficient working capital required to run day-to-day affairs, including payment of supplier bills or staff salaries, etc.
How I Do It
Come up with a budget: A comprehensive budget showing expected income streams against anticipated expenditure items massively assists me. I always try to stick to this financial plan as closely as possible so that no single coin goes unaccounted for. It’ll help with successful of organisational goals and objectives.
Frequently Reassess Costs: Regularly reviewing what I spend helps identify areas where I could make savings. Looking out for recurrent costs that may need trimming altogether is an equally important component of effective saving.
Negotiate Better Terms with Suppliers: Whenever necessary, I don’t hesitate to negotiate for favourable terms or ask for discounts from my suppliers. I can promise you, people will ask you for discounts throughout, so you might as well do it back to them. Over the long run, these moves can significantly lower the overall costs of running a business.
Cash flow management can be easy…sometimes. Understanding the cycle that my cash goes through has to be one of the most essential tips I have for you. Adopt these techniques into your business strategy today and see how they help you grow. Or, if anything, how it helps you stay afloat.