A great number of entrepreneurs have very little idea how much breathing room they really have when it comes to cash flow.
Everything may be running smoothly when suddenly your cash flow hits a roadblock—and you’re left scrambling to meet payroll or desperately seeking financing, which could cost you big time in the long run..
It’s a common problem, even for fast-growing, profitable businesses.
Setting up cash flow projections will allow you to forecast your business’ bank account more accurately, including risks of running too low on cash, or better yet, to give you more time to take action before it’s too late.
Here’s how you can stay on top of your cash flow by using accounting software:
1. Generate Monthly Cash Flow Projections
A cash flow projection is an estimate of the money you expect to flow in and out of your business, including all your projected income and expenses over a given period.
Although a cash flow projection typically covers a 12-month period, you can tailor this according to the financials that you want to see by shortening the estimates to cover a shorter period, such as a month or even a week.
For small business owners, projecting cash flow helps give you a clearer picture of where your business is headed, and how you can make improvements along the way. Cash flow projections also help foster good cash management and gives you peace of mind (sort of like planning your to-do list for the week ahead!).
Similar to how you want to know (or at least be aware of) what activities are coming up in your schedule, you want to have a good estimate of your cash flow for your small business as well. For instance, your projections can help you predict incoming cash surpluses or shortages, and then you’ll be prepared to make strategic decisions based on that data.
Businesses typically track cash flow (cash in and cash out) on a monthly basis. It’s important to record cash inflows and outflows in the month they’ll occur, rather than the month you make a sale or first get a bill.
2. Speed Up Cash Inflows
The quicker you bring money into your business, the least likely you’ll turn to a line of credit, and you’ll also be smoothing out any cash flow dips.
How to do it with Kashoo: There are a few simple and handy functions that you can use to speed up your cash inflows, such as:
Using the Kashoo app to process bills on-the-go
Doing this helps money flow into your business more quickly, while also reducing the risk of billing errors. ((Should there be a link here to a help article or a “how to” or something))
Sending invoices to your clients directly from within Kashoo
If you’re still using regular mail or if you’re emailing an invoice from your own email account, now is the time to switch to emails directly from your accounting software. Not only is it much faster than snail mail, saves you mailing costs, and eliminates having to dig into your own invoice template (or create one yourself) to send, but it also means you’re getting your customers to pay electronically—making cash inflows even quicker.
Having access to regularly check your accounts receivable
Having your accounts receivable within Kashoo’s Workspace Dashboard makes it easy for you to track unpaid accounts, and decide when to start chasing slow payers. If a client owes you money and hasn’t paid within the time frame you’ve given them, be sure to communicate with them!
3. Slow Down Cash Outflows
Using accounting software like Kashoo can help retain money in your business by slowing down cash outflows.
How to do it with Kashoo: For instance, you can easily track your bills at a glance to avoid any fees and interest. You can also use it to your advantage to avoid paying bills prematurely. For example, if your supplier gives you 30 days to pay, leverage this timeframe to your advantage for the business!
4. Keep Your Eyes Peeled on Your Numbers
Accounting software such as Kashoo is great because it offers you key metrics to optimize your cash flow management. You should regularly compare numbers, including actual cash inflows and outflows to your projections, and adjust your forecast as needed.
Try Kashoo for free today to see how our simple accounting software can help boost your cash flow!