Are you aware of these benefits of a cash flow plan?
What is the most stressful aspect of running a small business? It would not be a surprise if you mentioned cash flow. After all, cash flow is a measure of a company’s sustainability in the immediate future. Most small business owners are aware of the need to maintain a healthy flow of cash, but struggle to do so. By amplifying the benefits, we hope you will be driven towards achieving it. For more about cash flow stress click here.
1. Stay on top of your accounts receivable
Staying on top of your accounts receivable not only ensures there is money coming in, but it can also help you provide customers with payment plan options. This can go a long way towards building a healthy customer relationship.
2. Plug the gap
With a clear cash forecast, you will be able to plan and execute relevant measures to manage a cash gap. This can happen because of seasonal factors or planned capital expenditures. Whatever the reason may be, you will not find yourself cash strapped if you forecast properly.
3. Profit from surpluses
For some small businesses, this may be rare, but it can happen. For example, you may have booked in a big order that will come with a significant downpayment. Unless you carefully plan the use of this ‘bonus’, it may just trickle away.
4. Bring your budget to life
Most budgets look good on paper. They provide a clear and transparent direction for the business in the coming period. Unfortunately, in the busy-ness of running a company, they are often forgotten. Cash flow forecasts help you bring the budget to life, allowing you to keep track of your progress towards achieving your budget goals.
5. Make informed investment or purchase decisions
When an opportunity comes knocking, you should welcome it. Unfortunately, not many small businesses can do this as they are trapped by cash flow issues. Another opportunity to take your business to the next level passes by. With a cash flow forecast, you can make an informed decision. The purchase may create a cash gap, but you’ll have a plan to plug it.