Prudent cash flow management is critical in the smooth running of any business. A good cash flow makes it possible to buy raw materials and pay suppliers and salaries. A stable cash flow outlook can also help a business during crunch time. Most businesses track cash on a daily, weekly, monthly or quarterly basis. According to Profit Books, the two main types of cash flows are positive cash flow and its opposite, the negative cash flow. Positive cash flow occurs when a business receives money from sources like account receivable and sales.
The positivism arises when the incoming cash flow is higher compared the expenses or accounts payable. Negative cash flow, on the other hand, is where the outgoing cash is greater than the in-flowing cash. Fixing the cash flow issues can go a long way to keep the business afloat and stay profitable. The fixation strategies include seeking short or long term financing, delaying accounts payable, speeding the recovery of accounts receivable and liquidating cash tied on dispensable assets. Businesses can inculcate best practices for managing healthy cash flow over long term by:
1. Indentifying the underlying risks and addressing them in advance – a host of risks factors often come to the forefront when running a business. The risks range from accumulating non paid orders to cancellation of orders and other developments that may impact the business in a big way.
2. Open a separate business account – the business should have its own account, separate from your own personal account. The separation will give the business the free hand to run its course and achieve its goal as well as free itself from risks that may expose business to personal debt and other concerns.
3. Checking the inventory – taking a close look at the inventory is key in ensuring sound financial management. The process involves taking an assessment of the items that sell and those that do not as well as choosing where to put your money. The strategy will help cut down on unproductive investments while enhancing profitability.
4. Maintain a financial reserve and reducing expenses – having funds stocked somewhere in the bank can help a business when it fails to break even or during rainy days. Experts recommend 3 months stockpile sufficient to cover all the business expenses. The additional measure is reducing or controlling expenses because uncontrolled outflow can slowly kill the business.
It is important to reiterate that debt collection is one of the main reasons small businesses fail. However, the whole process of recovering debts in never easy, more so if the debtor is someone you know personally. According to Small Business Trends, here are the 4 tips of getting your clients to pay up debts.
Documenting all the bills and debts is an important step in managing and tracking debts. The documents can act as reminder or proof in case the debt situation leads to a legal battle.II. Offer easy settlement plan
If debtors owe a business huge sum of money that hasn’t been paid for a while, you can consider creating a settlement plan with favorable terms. For example, if a debtor owes $6,000, and efforts to track the payment have failed, you can reduce the amount to say $4,000 to make the settlement attractive.
III. Know your rights
The process of collecting debt that is past due takes a lot of effort and resources. The matter is made worse if you don’t know how to deal with collections or accounts receivables. You can overcome some of these challenges by seeking guidance from a finance professional or educating yourself about the basics in order to build self-confidence.
IV. Hire a collections agency
Reaching the decision to hire a collections agency is often seen as the last resort in pursuing overdue debts. The collections agency will almost certainly guarantee a repayment and free your time for other pressing issues in the business. The agency services can also come in handy in case a legal battle ensues.
The Nationwide Debt Reduction Services can Help!
One of the leading national debt collections agencies in the US is the National Debt Reduction Services. The company undertakes wide ranging collections services such as debt relief services on behalf of individuals, businesses and organizations. Besides the debt relief services, which targets people with financial hardships the Nationwide Debt Reduction Services is fully committed to achieving its goal of making its clients debt free. The fair and honest policy of no fees before settlement means its risk free services are open to all businesses that want to pursue unforthcoming debts. The company enjoys cordial relationship with most creditors and its operations are spread all across the US. The debt servicing team is made up of a team of professionals with years of experience.