Confused About Your Cash Flow? Read This!

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As a startup business leader, one of the things you must do is ensure your firm has enough capital to pay its bills. While you may be waiting for your clients to pay their invoices, you shouldn’t rely on those customers to pay you on time. The ugly truth is that many businesses end up going bust because their clients are bad payers.

It’s likely you are reading this article because you are concerned that your company might be sailing a bit too close to the wind from a financial perspective. If that’s the case, it makes sense to rethink your cash flow strategy. If the whole subject confuses or annoys you, don’t worry because you aren’t alone!

In today’s blog post, I’m going to share with you some ideas on how you can improve your business cash flow and have a healthy balance sheet. Here is what you need to do:

Credit check your customers

Before you offer any clients a credit facility, it makes sense to determine how creditworthy they are first. Doing so will spare you the headache and cost of having to chase for invoice payment, especially if significant sums are involved.

Should any potential customers fail your credit checks, you can, of course, offer them to option to pay in advance for any products or services they use from your business. Companies like Equifax make it easy for businesses and organizations to check the creditworthiness of their clients.

Borrow some money or build up your balance to cover your regular expenses

Let’s face it. There will be times where your business experiences “quiet periods” and makes little profit. As you can appreciate, such times can be stressful for business owners! You want to make sure that you have enough cash to pay your bills, staff wages, and so forth.

One idea is to have a “float” of money in your bank account that takes care of such situations for you. Business loans can be flexible and cost-effective ways of navigating any stormy financial periods. Another option is to invest more of your profits into the business and essentially build up your company’s bank balance.

Set up a savings account for your tax bills

Anyone that runs a business will have to pay various taxes on a regular basis. To make your life easier, siphon off some of the profits from your main bank account into a savings one specifically set up for your tax bills.

In some cases, you might find that the cash you save could even earn a bit of interest! From a bookkeeping point of view, it also makes it easy to determine the financial health of your business.

Don’t forget to project your future revenue

One last thing you should never forget to do is calculate how much income your firm is likely to make in the next year or more. Doing so will help you work out how much money you need to set aside for your expenses (including tax bills). Plus, it gives you an accurate indication of how well your business is growing!

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