Struggling to keep track of how much cash travels through your business? Fret not, because you are not alone – a recently conducted SPRING Singapore poll revealed that a quarter of SMEs had trouble keeping track of payments received from customers. If you’re the owner of an emerging business or a freshly minted startup, effective cash flow management is crucial for you. Failing to collect sales or deploying funds without keeping track of where the money goes will not only hamper pre-planned activities but will eventually leave you with depleted reserves.

Effective cash flow management might be challenging, but it’s not insurmountable. Spare yourself the horror of a rapidly diminishing bank account during economic downturn or seasonal demand shortages by committing to stringent financial checks and balances. We realize that cash is king, which is why we’ve put together a list of quick-and-easy solutions will help put your finances on the right track.

1. Forecasting

Depending on your business needs, forecasting can be performed on a weekly, monthly or even daily basis. If you’re a noob with numbers, thank goodness for technology-free tools; Excel and Google Sheets will literally do the math for you. For fledgling firms, forecasting is relatively simple, all you have to do is forecast for two very important variables: expenses and revenue. Even if your figures are not completely accurate, you will be mentally (and financially) prepped to weather through uncertainty.

2. Establishing clear payment terms with customers and clients

 As a small business owner, you depend on your clients to make timely payments, so you can finance other projects in your pipeline or use the cash to tide over short-term contingencies. While it’s fine to give your clients some leeway, repeatedly receiving late payments will leave your business in dire straits. Draw up a written agreement with your client that clearly states the amount receivable, window of repayment, grace period and interest rates.

3. Bill early, collect quickly

 Once you’ve signed an agreement with a client, don’t waste time in sending them an invoice. For larger projects, it’s completely reasonable to ask for a down-payment before providing any services, and you can also introduce incentives such as discounts for those who pay on time and penalties for those who don’t to encourage quick repayment.

4. Software to manage when payments are due

 Losing sleep over keeping track of incoming payments from clients? Not to toot our own horn too loudly, but we at Financio are here to rescue you from your accounting woes. Designed with the needs and capabilities of small business owners in mind, Financio’s software takes care of tedious work like generating entries, tax records and creating invoices for customers. Need to urgently contact your customers and suppliers? Our software helps you seamlessly connect to other businesses, even if they are not signed up on the platform. It’s really a win-win.

5. Consider B2B bartering

Don’t write off B2B bartering as an ancient business practice just yet. While other forms of contracts and transactions may have taken precedence, many businesses – especially small businesses – still practise a modern form of bartering by exchanging resources, customers and even funds. If you find yourself strapped for cash and unable to pay your partners, consider B2B bartering as an alternative form of payment.

 

Being proactive about your cash flow management system will bring about several benefits for your firm in the form of greater profits, increased liquidity and effective financial cushioning to withstand business calamities.