Managing Cashflow in Your SME

Having money coming in and out of your business is essential in allowing day to day operations to run smoothly. Without a good cashflow, businesses can often find themselves struggling financially, since their growth and maintenance is halted by a lack of investment means. Here is a short guide on managing cashflow in your business.

Measure

You may have an idea of what your cashflow is like from running the business, but do you know it inside out? Measurement is an important tool for any aspect of business, but in terms of cashflow it helps you determine exactly where you could improve.

The best way to measure this is to create cashflow projections, in which you collect details of every area of your business which will be dealing with money coming in, as well as expenditure. This will help you calculate your level of cashflow, and give a good indication of how well your business is running.

Liquidate

One way of improving cashflow would be to liquidate assets which are redundant or outdated. The effectiveness of this will depend on how many assets you own, but it can generate money quickly without costing you anything. Stocks and shares and are one example of assets which are fairly easy to liquidate, as they can usually be sold fairly quickly.

You can use the lump sum received from this to invest in your business, potentially increasing your operational capabilities and thus chances of gaining customers. Just make sure that you do not liquidate assets which are still useful to your business.

Invoice Finance

Arguably the most effective way of managing cashflow is to use invoice finance, which involves selling customer invoices to a lender in return for a large proportion of the value. You then receive the amount in full once the customer has paid (with the lender’s fee deducted).

The main benefit of this method is that it provides a constant injection of cash into the business, and waiting times for invoice payments are practically eradicated. Therefore, you can continue to accept new clients and keep your business running smoothly without worrying about lack of funds.

Managing cashflow is certainly not difficult provided you have the necessary systems in place to ensure it is constant and measured. You can begin to make improvements once you have a good idea of the cash coming in, and how it can be best spent. Once cashflow becomes more constant, your business should naturally grow and prosper.

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