5 min read

5 rules for managing small business cash flow! 

cash flow management rules

Cash flow management is one of the most critical aspects of running a business. This is the reason why every business, irrespective of its size must put a solid and smart finance management system in place. Since invoicing is a big part of cash flow management, having a systematic invoicing system can be a huge help. 

With disrupted invoicing, you can end up hurting your business’s cash flow, leaving you high and dry on the occasion of need. Every business owner must make a habit of sending invoices on time, especially small business owners. Luckily, today we have several different invoicing systems that can easily automate your process of invoicing, hence smoothening the whole cash flow for your business. 

Paci Finance is one such software. With the best invoicing system embedded with many more finance management features like cash flow insights, connected banking, tax calculators, and more, you can easily monitor your business’s cash flow and maintain it by automating your invoicing. 

However, it is important that you know these 5 rules for managing your cash flow before you start to work on your cash flow system – 

When it comes to maintaining a healthy cash flow, there is much more than invoicing that you need to take care of like having a solid revenue. Below is the list of rules following which you can achieve strong cash flow management for your small business.

Always keep your books up to date 

Remember that your cash flow is codependent on the accounting and reporting system that you have. Make sure that your books are always up to date to get insight into your business’s financial status. 

Don’t be too lenient with your customers 

It is important that you maintain a good hold on your invoicing system. You need to be direct and fair without being a pushover. Remember that you don’t have to be afraid to take formal action when and if it is needed. Always stay on top of your accounts receivable turnover to have a healthy business cash flow.

Always keep your accounting simple 

Most small businesses end up complicating their accounting system without any reason. This is why having a good accountant and accounting system in place is necessary. For instance, if you have a big new order coming, your accounts will help you gain a sight on how ready you are to handle it. Good accounting software will help you keep track of different accounting metrics like accounts receivable ageing, operating margins, and inventory turnover.  

Always keep your personal and business finances separate 

Another accounting rule every small business owner must follow is to understand your cash flow and forecast how it might change over a period of time. Most business owners tend to complicate things by mixing up their financial and personal finances. This is why it is important that you keep both personal and business finance separate. 

Build a solid cash reserve

Having a cash reserve is another very important accounting rule every small business owner must take care of. A cash reserve provides the cushion you need to manage any unexpected events. This can insulate you from the economic cycle of your business. In simple words, cash reserve puts your business in a position of strength. 

In the end, we would recommend you have a good & unified finance management software like Paci Finance in place that handles all financial aspects of your business. Remember “Cash is King” is a trite expression but is vital for small businesses. Following these 5 rules can help you keep money flowing through your business. 

 

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