Cash Flow Management


Effective Cash Flow Management Strategies for Businesses

Good cash flow management is at the heart of most successful businesses. Preventing cashflow problems is vital if you want your business to thrive and survive. According to statistics, most new businesses fail because they have not managed their cash flow correctly. So, what can you do about it?

  • Cash flow management plans are essential to the continued financial success of a business.
  • Projecting cash flow can assist with your business forward planning.
  • Improving your receivables and managing expenses and shortfall, ensure that your business remains solvent.
  • Late payments can cripple your business; effective customer payment terms can help circumvent payment problems.
  • If you do not have the three essential characteristics for managing your cash flow, you need to find someone who does.
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Having a Cash Flow Management Plan is Vital

This is a big one, and it applies to all industries of all sizes. If you do not have a cash flow management plan in place, then you will not be able to tell when your business is about to be hit by a misfortune. Neither could you tell how much excess cash you might have available.

With so much financial pressure on individuals and businesses, it is imperative that you have a cash flow management plan in place to help you through these troubled economic times.

A good cash flow management plan will be frequently reviewed, detailed and accurate. It will probably look ahead weekly for the next two months, then monthly for the following three to four months, and well into the year ahead.

Below are some key cash flow management techniques to help you stay in the black:

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Cash Flow Projections

Preparing accurate cash flow projections can alert you to problems before they materialise.

Cash flow projections are educated estimates that incorporate your customers’ payment histories and how long your suppliers are prepared to wait to get paid.

Begin your cash flow projections by adding cash on hand at the start of the period with the cash you expect to receive in. Then note the dates and amounts when you will have to outlay some money.

Cash flow projections should cover the following year and possibly also the next quarter. Preparing accurate cash flow projections is an important part of cash flow management.

Preparing accurate cash flow projections is an important part of cash flow management

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Improve Your Receivables

Improving your receivables is another way that you can manage your cash flow. In other words, you need to increase the speed with which you turn supplies into product, inventory into receivables and receivables into cash.

This can be done in different ways such as carrying out credit checks on new customers and by following up on late payments.

Cash Flow Management

Managing Expenses and Shortfalls

Another way you can manage your company’s cash flow is by controlling your expenses. One of the ways this can be achieved is by only making payments on the day they are due, not before. Also, businesses could consider hiring contract or part-time employees instead of full-time employees.

Businesses experience cash shortage at one time or another. The trick is to be aware of the deficits as early on as possible. Banks are very nervous about lending money to people and companies who say they need money straight away. They much prefer to be given notice that you will want to borrow.

One way to manage cash shortfalls is to realise that your company is going to experience them at some time and therefore to arrange a variable loan facility with your bank or retain a cash reserve. This will enable you to borrow money when you need it.

Alternatively, you could ask suppliers for extended payment terms or ask your best customers to speed up payments.

One way you can manage your company’s cash flow is by controlling your expenses

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Create Effective Customer Payment Terms

Late payments can be crippling in more ways than one. If the problem is not addressed by setting up a method of prevention in the first place, serious problems will ensue: issues that will affect the profitability of your business, because you will be spending valuable time and resources chasing money and losing interest. And more worryingly, these problems could lead to difficulties obtaining credit.

Prevention is better than cure; make sure you have clear terms of business that set out your payment terms and ensure you enforce those terms.

Make sure that invoices are sent out regularly; do not delay in sending them out as soon as a job or an order is completed.

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What if I don’t have time to manage my cashflow?

At Collins Mann, we talk about the TED principle…and no, we do not mean the ‘Technology, Education and Design’ acronym made famous by talks of the same name.

When we talk about TED, we are talking about ‘Time, Expertise or Desire’. The simple truth is that if you lack one of these characteristics then you should look for professional help for financial issues.

You might well have the expertise and desire to manage your own cash flow.  However, like most business owners, if you lack the time, it becomes a really important business decision to outsource the job to a company that has all three.

The financial advisory team at Collins Mann can help you put a plan in place. This means that you can get on with running and building

your business, while someone else takes care of getting the most out of your business’s profitability.

Brisbane based, servicing all of Australia, Collins Mann offers small to medium businesses of all types the chance to cherry-pick from a flexible range of services including wealth management and accumulation strategies, risk insurances, cash flow management, financial planning, and portfolio structuring.

Financial Services

Our services include:

  • Values-based financial planning.
  • Wealth accumulation strategies.
  • Tax-effective strategies.
  • Risk management.
  • Retirement planning.
  • Estate planning.
  • Divorce financial settlement analysis.


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