If you are a woman who recently created your very own startup, congratulations! You’ve ventured into a very exciting and rewarding world. Owning her own business can be one of the most fulfilling things a woman can do. It can also be one of the most challenging things, especially when it comes to managing your company’s cash flow. You don’t want to face the difficult situation of not having enough cash to pay the bills for your business.
Here are some tips to help you take control of your company’s cash:
Your company’s cash conversion cycle is, in essence, the amount of time it takes between when you buy your inventory to when you pay for it. First, you buy what you need. Then you put effort into sales. Then customers buy your products. And then you pay your suppliers, and that’s when the cycle ends. A lot of novice business owners get caught up waiting for their customers to pay them, and this slows the cycle down. When the cycle’s slowed down in this manner, you might have to pay your suppliers before you have the necessary amount of cash in your company bank account. This spells trouble for your business. You need to prevent this from happening.
Accounts receivable is one of the most important factors affecting cash flow, along with accounts payable and inventory. To improve collections of accounts receivables, you must adopt stern policies regarding late payments; a thorough check on credit records should also be made before extending credit for expensive items. Invoicing the soonest time possible is also advisable, so is charging fees on late payments. Email and phone reminders are sound collection efforts too. Accounts receivable aging reports for long-term debts enable you to efficiently scrutinize individual customers, the payment behaviors of each, and detect accounts that have potential to become bad debts.
Collecting from customers early is advantageous, but paying your suppliers early is not. When it comes to paying your suppliers, you have to delay payment for as long as you can without necessarily going beyond the deadline, so as to preserve your good credit standing. Electronic fund transfers can be arranged with the bank so you can make payments when your liabilities are due and not have to send money out days beforehand. The idea is to pay your payables at a much slower pace than you collect receivables from clients.
Tracking of inventory movement is tricky, but with inventory management software, raw materials, work in process, and finished products are monitored much more successfully. With this type of program, you can keep an eye on orders, goods shipped, and the inventory itself; you will also know which products are selling the most and which are literally slow or non-moving. A good portion of your resources is represented in inventory, so you have to manage your inventory wisely.
Preventing delays in your cash conversion cycle, correcting the flow of accounts receivable and payable, and employing inventory management software definitely helps you achieve faster and more favorable cash flow. So, ease your mind about cash with the previously mentioned strategies, and enjoy owning your own business!
photos courtesy: redscottphotography.com
Author Bio: Margot is a guest post writer on the subjects of running your own business using tech tools like inventory management software.