Cash is the lifeblood of a company. Cash management is a practice to balance a flow between income and expenses. It’s basically a broad area of finance that involves collecting, handing and utilizing cash in a right way. Managing cash is one of the key areas that determine the success of a business as it supports the core needs of the business.
Efficient cash management improves profitability and growth of a company. As a result, the companies are seeking for cash management solutions, while focusing on strengthening internal controls that will lead to higher degree of centralization of cash management activities.
Irrespective of the business size, if your money is floating and resulting in bad debts, it may put a negative effect on your image. Having a good ratio of cash balance in your balance sheet helps you to demonstrate yourself and your business to the potential investors.
So, if you want to improve the cash stability of your company, here are some quality tips for better cash management:
Working Capital Management
Cash flow is not just restricted to working capital, but other essentials too including payment of operating costs and payment to the suppliers. Instead of stopping payments to the parties, it’s a good idea that you focus on payment history and scenario of business and make a way to pay off the debts for smooth performance of a business.
Forecast Accurate Cash Flow
Forecasting inflow and outflow of cash improves business opportunities. Financial experts suggest that business should forecast cash flow on monthly basis to identify improved opportunities. Along with understanding its importance yourself, it is equally essential that you create awareness among your organization regarding cash flow management organization.
Analyse and Evaluate Capital Expenditure
For growth of a business, it’s important that you preserve some cash your business generates. Slashing your capital expenditure is one way. For the better move, consult your financial advisor or accountant.
For the success of a business, taxes should not be a reason for cash outflow. If it’s there, consult with your accountant and find out some ways to optimize tax outflow.
Be Aware Regarding Incentives
For the small businesses, lots of incentive options are available in the market that generates profits for the business. So, research for the programs that may help you to earn incentive while improving cash flow margin.
Create a Culture of Cash Consciousness
For the company having separate sales and finance team, it’s essential to create such culture. As sales team considers cash management as a responsibility of finance team and will definitely offer credit terms to the clients with a hope to reach monthly sales target.
So, overcome this situation with cash consciousness behaviour and differ incentives to sales team on collection basis rather than on sales figure.