During times of boom, it’s tempting to boast about new business or rising profit – but healthy cash flow is just as important. In fact, it’s essential for survival.
While profit gives you a snapshot of how your business is doing, cash flow shows the actual money flowing into and out of the bank account over time. This can help you identify areas of the business where investment may be needed or to spot any early signs that your business is facing financial difficulties. When you need advice from Bookkeepers Hereford, go to Office Support Bookkeepers
The best way to improve your business cash flow is to ensure you’re earning more than you spend. This can be achieved by ensuring you’re invoicing customers promptly, offloading any inventory that isn’t selling quickly and minimising fixed expenses such as rent, equipment purchases or loan repayments.
It’s also vital to be smart with your petty cash – avoid spending more than you have, and keep receipts for small items like postage or coffee (to be used as credit against your next invoice). Keeping tabs on the inflow and outflow of cash is crucial for understanding what your company is doing with its money.
An effective cash flow management plan should be an essential part of every small business owner’s toolkit. By taking a holistic view of the business, logging expenditure and earnings with care and using tools to provide clear and visual reporting, you can take action quickly to address any cash flow concerns.