Keeping a watchful eye on your cash flow is crucial to the overall health of your business. Without a sustainable and effective business cash flow, you are at risk of facing debilitating financial difficulties. Poor cash flow is one of the primary reasons why one in every four businesses fail to survive during their first year of operations.

It is essential to take note that cash flow issues can be quite unpredictable. They can still arise even when the business appears to be efficient and profitable. This is the reason why it’s advisable to implement preventive strategies that can improve your cash flow management overtime.

1. Inventory Checks

Performing an inventory check can help you identify some potential problems that may arise in the future. It is vital to check your inventory on a regular basis to make sure that the goods you\’re purchasing will not tie up much cash, and damage your cash flow.

2. Cash Flow Forecasting

The first clear step towards effective cash flow management is to get an evident sight on where your cash flow is currently at and where it is likely to be going in the future. It is essential to remember that a sufficient cash flow forecast points up the key cash flow engines of your company. This might be composed of the following components:

● Sales

● Accounts Receivable

● Accounts Payable

● Inventory

There are so many businesses that have been blindsided by unfavourable cash flow shifts that are foreseeable, if only they took the time to perform a forecast.

3. Perform Customer Credit Checks

If the customer refuses to pay in cash, then make sure to perform a credit check before proceeding with the deal or transaction. If the customer has bad credit, then you can reasonably conclude that you will not collect payments on time, which may negatively impact your cash flow in the future.

Hire Prosperity Accountants

Positive cash flow is the product of operations that work efficiently and systematically. While implementing the major strategies presented above should help improve the cash flow of your business, it is also advisable to seek help from professional accountants if you\’re already facing severe cash flow problems.

Call the team at Prosperity Accountants on or fill out our contact form.