5 strategies to improve your business cash flow
One of the most common problems faced by SMEs is reaching the point where they find themselves without the cash needed to meet their business responsibilities, such as accounts payable to suppliers. This has a lot to do with a lack of planning, but also with the absence of the necessary tools to keep their finances in order.
What if, for example, your customers paid their invoices on time, even earlier than agreed? The benefits for your company’s operation would be immediate. But of course, concrete measures are needed to achieve this, what are they and how can you start implementing them?
When we analyze our cash flow, we look for income to be greater than expenses. If the opposite happens, the capacity to generate money to cover fixed expenses and leave a margin of profitability is low and can cause you problems in the future.
The lack of control and optimization of cash flow is one of the main factors of bankruptcy in companies. To avoid failure in the financial management of your organization, there are certain tips to improve your cash flow. We hope they will help you!
Madaí García · Ene 17, 2022 · 5 min de lectura
Madaí García
Ene 17, 2022 · 5 min de lectura
Did you know that approximately 62% of SMEs in our country fail due to poor cash flow management?
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One of the most common problems faced by SMEs is reaching the point where they find themselves without the cash needed to meet their business responsibilities, such as accounts payable to suppliers. This has a lot to do with a lack of planning, but also with the absence of the necessary tools to keep their finances in order.
What if, for example, your customers paid their invoices on time, even earlier than agreed? The benefits for your company’s operation would be immediate. But of course, concrete measures are needed to achieve this, what are they and how can you start implementing them?
When we analyze our cash flow, we look for income to be greater than expenses. If the opposite happens, the capacity to generate money to cover fixed expenses and leave a margin of profitability is low and can cause you problems in the future.
The lack of control and optimization of cash flow is one of the main factors of bankruptcy in companies. To avoid failure in the financial management of your organization, there are certain tips to improve your cash flow. We hope they will help you!
Ana Luna · Oct 14, 2021 · 5 min of reading
Ana Luna · Oct 14, 2022 · 5 min of reading
Oct 14, 2022 · 5 min of reading
1.- Keep a close eye on liquid assets.
This is the most important recommendation to improve your company’s cash flow and economic health. You must keep a close eye on cash balances, bank balances, accounts receivable, and credit payments. In this way, you will be able to make more solid projections, evaluate the company’s ability to produce cash, identify capital leaks and, in general terms, define more accurately the current health of your company.
Regarding this issue, it is advisable to rely on specialized software in accounts payable and receivable, as it can be decisive to maintain a positive cash flow within your company.
2.- Invoice and collect as fast as possible
The faster you invoice your customers, the faster the customer will be able to settle his account. Keep in mind that the average invoice payment term is 30 days, two months between the delivery of a product or service and the payment.
An electronic invoicing system is a key, as well as a collection software that allows you to monitor and automate accounts receivable. In any case, the idea is that your customers pay on the previously established dates or even earlier. Think about offering an incentive to encourage this behavior in users, such as a discount for prompt payment, for example.
3.- Plan your growth well
When companies have a good level of sales, they seek to grow and expand. That’s a wonderful idea, but if you remember how to interpret cash flow, it will be clear to you that the ideal balance is when there is more income than expenses.
Hiring more staff, buying assets, or opening new branches of your brand can lead to an economic crisis if there is no ROI in the short or medium term. Therefore, before acting, you should carefully analyze the impact on cash flow before implementing growth actions.
4.- Reduce your expenses and avoid getting into debt.
Requesting a loan to cover your company’s cash deficit is a red light that your income is lower than your expenses. Therefore, you must eliminate unnecessary expenses and identify the causes of the problem, so that you can solve it as soon as possible.
Keeping an eye on your company’s level of indebtedness will allow you to maintain a positive cash flow and, therefore, good financial health.
Tu negocio es tu pasión.
La nuestra, ayudarte a crecerlo
5.- Lean on technology to improve your cash flow.
Nowadays, the adoption of technological tools is one of the best ways to invest and improve cash flow.
You should consider that SMEs that monitor their cash flow every month have a survival rate of 80%. To adequately monitor this indicator, the use of digital tools is crucial, especially to optimize time and improve accuracy.
Accelerate your business processes with Vendorplace
The goal of any finance department is to shorten the lead time for payment fulfillment in the accounts payable process and thus improve cash flow. That’s why digital tools can help you in a variety of ways by applying them in the right way to your business financial management model.
Digitize and speed up payments to your suppliers. Meet the new way of business management with Vendorplace, synchronizing your invoices, approving and paying each one of them. Avoid delays and pay your suppliers quickly by any means (without the need for bank procedures) or upload your receipts to the platform.
Payments are always on time and under control!
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