Cash Flow Management Tips for Small Businesses

If you’re an entrepreneur, you’ll probably already know how important it is to maintain a steady flow of cash for your business. It is quite literally what keeps your business up and running. For many up-and-coming businesses owners who just started, managing a healthy cash flow is essential to business survival. It is how you will ensure that you're open for business, you pay your employees' salaries on time, and that you have enough inventory of raw material to manufacture your products.

No matter what stage your business is in, cash flow is very easy to understand. Simply put, it is the movement of cash in and out of your business. When cash enters your business (through sales or money from your debtors), it is an inflow. When it goes out (through monthly expenses or salary payments), it is an outflow. When the former is greater than the latter, it is a positive cash flow. Now that you know what cash flow means, here are three tips for maintaining healthy cash flow:

1.Clear Your Debts on Time

This is a universal rule all entrepreneurs should follow at all times. Paying off debts is, of course, a cash outflow, but it's non-negotiable. Categorize your debts into smaller and larger amounts, as it's always easier to clear the former first. Once that's done, figure out a plan to pay off your larger debts steadily, over some time. In today's day and age, electronic payments have become the norm. The payment gets done in a few hours tops. If you don't have enough cash to clear your debts, you can choose to go for a salary-based loan via a salary loan app. Such apps even offer loans to business owners, provided you fulfil all the criteria and have the required documents.

2.Accelerate Recovery of Receivables

Accounts receivables, or the payments you get from your vendors and suppliers, form a significant part of your cash inflow. So, it's only natural that you do everything you can to speed them up. First off, send invoices out early. Don't wait till the end of the month, but bill vendors on the delivery of your products. Also, make sure that your invoice is easy to understand. It should contain the amount due and the due date in bold. The payment terms should be included in as well. Secondly, incentivize early payment. If you have a few vendors who pay early, offer them discounts or cash backs. Thirdly, make sure that there are several payment options they can use, including UPI, Net banking, etc.

3.Sell Unnecessary Equipment or Inventory

Depending on the nature of your business, you may have equipment or machines lying around unused. If and when you fall short of cash for necessary expenses, you can sell such equipment and use the money to meet your requirements. You can do the same for idle inventory. A section of your goods might not sell as fast as the others. If so, why buy more of them? Unused equipment and inventory take up a lot of cash. Selling them is a good idea because you can then put the money to good use without compromising your cash flow. Such hacks are better than availing of business loans in the long-term.

Wrap Up

As a business owner, there are many measures you can take to maintain healthy cash flow levels in your business. The points, as mentioned above, are three of the most popular tips out there. Sometimes, despite your best efforts, you may still need more working capital to keep your operations running. In such cases, a salary-based loan or app can come in handy. KreditBee is one such reliable app. Just download the KreditBee app from the Google Play Store, complete your profile, and leave it to us to process your application in as little as 10 minutes! To learn more, you can write to us at [email protected] or reach us at +080 44 292 200.