Female business owner meeting with female accountant in office and using laptop. Concept: Cash Flow Management
Betsy Wise
By: betsy_wise
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Top 10 Ways Your Accountant Can Help with Cash Flow Management

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Cash Flow Management is one of the most important tasks for any business owner.  Managing your cash flow involves being aware of how much cash is available at any given point in your business and how much cash flows in and out of your company. That way you can identify whether there’s a shortfall of working capital and take the measures to guarantee an optimal amount of money available today or six months from now.

Most small business owners don’t have a full-time accountant on staff to take care of cash flow management but they do consult with an accounting professional occasionally to make sure that cash flows positively (more cash comes in than goes out). Just so you know, cash flow problems are a leading reason why many businesses fail. Here are 10 things you and your accountant can do to keep cash from dipping into dangerously red levels and incurring negative cash flow.

10 Ways to Manage Cash Flow

Even if you don’t hire an accountant, you can implement these actionable tips on your own for healthier cash flow management.

  1. Prepare cash flow projections: Create a cash flow statement weekly or monthly that lists cash receipts, operating expenses, upcoming costs, a projection of costs of goods sold, and the amount of cash you currently have. Because accounts payables and receivables rise and fall, you’re always making an educated guess. Until you get a handle on cash flow, it’s a good idea to review projections daily and thereafter weekly or monthly. Your accountant can advise what to look for when trouble is just around the corner so you can prevent it.
  2. Keep detailed records: Record all the money that goes into your business (from which clients and when) and all that goes out (what are you spending on and when). Your goal is to make sure there’s enough income to pay debts and unexpected expenses. Consider investing in an online accounting system which can also be assessed by your accountant. Most programs are simple to use and include a mobile app to compute on the go. You can create reports to help with cost flow forecasting and prepare for large expenditures.
  3. Know who your customers are: You will always have customers that pay on time, but also ones that won’t. If your accountant handles this aspect of accounting, he/she is up to date on each customer’s credit history. To boost cash flow, implement a system to manage your accounts receivable: you could, for example, offer discounts for timely payments to incentivize late-payers or the opposite -include a late-payment fee to discourage this habit.
  4. Reduce expenses: Sometimes you may spend money on things that don’t really help your business grow. Alongside your accountant, go through each line item expense and see which ones cost your business the most. You may be able to reduce those expenses or eliminate them altogether. Sometimes business owners make hard decisions like reducing staff or slashing a marketing budget. Oftentimes, they lease equipment or rent space to avoid tying up capital.
  5. Prepare for what-ifs: Ask your accountant if getting a line of credit (LOC) with the bank makes sense for your business. A LOC allows you to borrow money whenever cash flow starts going south. You only borrow what you need and make timely payments to repay the loan.
  6. Identify weak areas: If cash flow is borderline or too low, try getting help from your buyers and suppliers. Perhaps your accountant could negotiate extended terms from suppliers or faster payments from clients. It may be possible to shop around for better deals on supplies and utilities or raise prices slightly on your products and services.
  7. Streamline your accounts: Keeping accurate financial records and having one account for everything (instead of several) is easier because you can calculate your cash flow much quicker.
  8. Have budgets for everything: Planning for every scenario decreases the possibility for your finances to go sideways. By knowing what you’ll pay, you don’t overspend and are better prepared to face a financial crisis. By analyzing data from prior periods, you can spot income and expense trends at a glance.
  9. Double check numbers: Make it your goal to snuff out errors before they turn into problems. Don’t give your clients wrong due-dates, make sure you don’t overbudget or underbudget expenses, and avoid mistakes when projecting income. Avoiding small mistakes helps you trust financial data so you and your accountant can make accurate projections about cash flow.
  10. Get a small business loan: If your cash flow is less than optimum, apply for a small business loan to cover gaps in funds. Having more cash in hand gets your finances on track while you’re in the process of implementing these other new ways to manage cash flow.

QUICK TIP: A professional with a trained eye can identify problem areas before you can. Even if you don’t employ the services of an accountant regularly, you can set up quarterly appointments with them for an in-depth review of your financial statements. If it’s necessary, schedule more frequent appointments.

Read: Is Your Business Ready for an Accountant?

How Cash Flow Management Can Change Your Business

Are you excited about your business’s future by implementing these 10 ways to stay on top of cash flow management? In addition to increased liquidity, you’ll be able to make well-informed business decisions because you’ve learned to monitor income and expenses and project cash flow. By reviewing your business’s historical cash flow performance with your accountant, you can avoid dreaded dips in revenue. Moreover, you can benefit from one of our loans when going through a rough patch. By submitting this simple online application, you could receive your funds within 4-10 business days. At Camino Financial, we stand behind our motto, “No Business Left Behind” and will work with you to achieve your financial goals. Why not contact us today to find out how we can help you with cash flow management and make funding recommendations tailored to your type of business.

 

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