Cash Flow Management

Cash Flow Management is the process through which a business's cash flow is monitored, analyzed and adjusted according to the company's performance. This sort of analysis of a company's financial resources is extremely important, especially for small businesses. This data is very essential, as it helps monitor the inflow and outflow of funds for these companies. Cash Flow Management helps you make and accumulate cash so that you can compensate for the cash outflow gaps. This would further help strengthen the trust of investors and lenders in your business.

It is important to remember that the inflow of funds is generally slower than the outflow in most cases. The right approach to this problem would be to take steps towards speeding up the of inflow of funds and slowing of the outflow. There are certain points that are essential in relation to Cash Flow Management:

Cash Inflows:

1.Customer payments.

2.Bank loan receipts.

3.Interest on savings and investments.

4.Shareholder investments.

5.Increase in bank overdrafts and loans.

Cash Outflows:

1.Purchase of stocks, raw materials and tools.

2.Daily operating expenses such as rent, wages, etc.

3.Purchase of fixed assets such as furniture, computers, machines etc

4.Repayment of loans.

5.Dividend repayment.

6.Taxes such as VAT, corporation tax, etc.

7.Reduced overdraft facilities.

An effective cash flow management ensures a profitable and smooth running business. There are several factors that need to be observed to maintain a decent balance between inflow and outflow of monetary resources:

Customer Management:

1.Define a crystal clear credit policy emphasizing upon your standard payment methods.

2.Issue invoices on every sale and be on a relentless pursuit towards collection of outstanding payments.

3.You should keep the option of 'charging penalty interest on late payments' open. This will deter customers from paying you late or entirely defaulting on the payment.

4.Discount offerings to prompt paying customers is a good way of motivating other customers to follow suit.

Taxation:

As an entrepreneur you are liable for different types of taxes that includes Income Tax, Corporation Tax, Business rates and Stamp duties. Therefore it is in your best interests to maintain a record so as to calculate your liabilities and make your returns on time.

Asset Management

Leasing your fixed assets such as buildings equipments or hiring them for use is a good way of saving and earning money. Immediate heavy expenditures can cause a havoc on your cash flow in the very first year of the business.