Finance

The Importance for Businesses to Control Their Cash Flow

While it may seem somewhat obvious to highlight just how important proper financial management is for a business, the regularity with which that advice is ignored makes it worth repeating. Most companies will lull themselves in to a false sense of security by doing just enough to keep their books ticking over, but when anything slightly deviates from the norm – which, may we add, it tends to from time to time in business – they are the ones who find themselves at a loss most quickly.

Chief amongst those things most often overlooked – and perhaps the most pertinent of them all – is cash flow. On its surface it may seem a simple enough concept, but it’s taken for granted and misunderstood enough for businesses to dig themselves in to some serious holes due to overconfidence– but there are a few things worth keeping in mind at all times which can help keep things ticking over better than the may do otherwise.

the importance for businesses to control their cash flow

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Organise Financial Records and Manage Outgoings

All businesses have expenditure, it’s just how it works. What you can’t have, however, is losses, and that happens when companies aren’t keeping as close of an eye on what is coming in and out of the business as they should. Whether it’s making payment, organising salaries or ad-hoc payments like equipment upgrades or staff engagement occasions, there has to be enough in the accounts to make those additional moves worthwhile – they’re designed to enhance a business, not strangle it.

Nothing should ever be spent within a company without at least two people having approved and signed off on it, and all regular outgoing should be carefully processed and managed by a dedicated member of staff. Additionally, all company financial records should be organised and filed appropriately, so that they’re easily accessible and understandable in any event that they’re required. Businesses who have unorganised books will have untidy accounts, and that’s a real shortcut to disaster.

Invoice and Invoice Discounting

Businesses will inevitably have to bill for things, and in doing so, invoices will be formed. While they can be easily created, having a system in place to keep up-to-date and on track with how they’re progressing is a little more sophisticated, but just as important. A good place to start is by implanting reference numbers for both internal and third-party use, so you always know what you’re discussing. Where unpaid arrangements are concerned, one option available to businesses is to utilise an invoice discounting facility, allowing the company to release working capital.

About the author

John Brown

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