Organizing Your Cash Flow! : Do you know what cash flow is and how to apply it to your business? This concept is very important to ensure good financial management of the establishment . After all, it allows you to identify how much money comes and goes from your company, which generates greater predictability and facilitates control over your accounts.
In this article, we’ll talk a little more about the subject and bring you some tips for organizing and improving your business’s cash flow.Come read and learn from us to differentiate yourself in the market and bring intelligence to your business decisions!
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What is cash flow? How Organizing Your Cash Flow ?
Cash flow is nothing more than your company’s inflows and outflows of resources over a given period.While inflows correspond to the value of sales and any investments, outflows are all the expenses you have with the business: renovations, supplier payments,loans andemployee salaries, etc.
Therefore, you need to balance your cash flow and try to keep it positive.In other words, the total value of inputs must be greater than that of outputs.Otherwise, you could compromise the financial health of your business.
How important is it to have Organizing Your Cash Flow ?
Well-organized cash flow is very important for the management of small and medium-sized businesses, especially to understand whether the enterprise is profitable or not.After all, how can you know if the business generates profits if you don’t even know the inflows and outflows of resources?See the benefits below!
Expand your business vision
Through a simple and organized cash flow, you can expand your vision of the company.That is,understanding which months have the highest income, whichmarketing strategieswere efficient inincreasing salesand the financial health of the business.
Furthermore, it is possible to identify periods of seasonality and find strategies that will help you overcome drops in revenue.This way, you keep your business profitable and ensure long-term sustainability.
Improve financial management
Financial managementisan essential point that makes all the difference in successful businesses.Through good solutions, you can find ways to reduce costs, improve revenues and keep returns high.In this sense, cash flow is fundamental.
This instrument serves to optimize the financial management of the business, as it shows the need for improvements when the value of the flow indicates a negative result.And how can you organize and improve your cash flow?That’s what we’ll see in the next topic.Check out!
How to organize and improve your cash flow?
The idea is that this feature is simple and easy to use.So, even if you are not very familiar with financial data, it is easy to understand the current conditions of your business.Follow along!
1. Write down inputs and outputs
One of the most important points to have good cash flow management isto write down all the company’s inflows and outflows, which also contributes to yourinventory management.As we have seen, these are the main cash flow items.Therefore, it is essential that you are clear about all the values mobilized in your business.
One idea is to create a Cash Flow Statement (DFC), a document that covers your inflows and outflows.This is the first step to organizing your cash flow.After all, from this, you have the necessary data to understand the financial health of your company.
2. Adopt management tools
Management tools are very efficient for organizing your cash flow, as they offer a complete view of your inflows and outflows.These systems even help when making your DFC.
Furthermore,managementsoftware modernizes your company and allows you to automatically issue accurate reportsonbusiness data.From this, you have more elements to make the best decisions about what should be done to improve your cash flow.
3. Make comparisons
Taking advantage of management software to issue reports, you can easily compare your results in different periods.This allows you to observe which strategies were more or less efficient in increasing revenue.
Furthermore, through cash flow, it is possible to identify which product mix had the greatest impact on revenue generation.This way,you can have a clearer perception of the moments of high or low demand for your business.
Even if you don’t use this type of tool, it’s important to keep a record of entries and exits month by month.This way, you can understand the performance of your cash flow and check whether your strategies are aligned with market demands.
4. Reduce costs
As cash flow involves both inflows and outflows, to change your results in this regard, you can change one or the other.In the case of the latter, one idea is to review your expenses.After all, to have a positive balance, you need to earn more than you spend.
So, evaluate your costs and see if there is anything you can cut.This process even helps to identify points of improvement to improve your processes.But to reduce costs, you can alsonegotiate with suppliers, for example, or seek better conditions with other partners.
5. Review prices
If in the previous topic we talked about reviewing your business’s outputs, now let’s focus on the inputs.A tip in this regard isto review your prices.Is it possible to increase the value of some products and your profit margin?This can make a big difference in your income if you maintain the sales pace, even with a higher price.
Of course, it is necessary to test this strategy, as a sharp increase in prices can scare consumers.But if your cash flow is negative or has not yet reached the point you would like, changing some prices could be a solution.
Another idea is to optimize yoursales strategiesto ensure that the total value of inputs is greater than that of outputs.
6. Manage working capital
Working capitalcorrespondsto the total financial resources needed to keep your operations running.One of the elements that compose it is the cash value.Thus, it depends on the organization of your flow.
So that you always have working capital available to make your payments and not compromise your cash flow, it is necessary to align these elements.One tip is to adjust the payment deadline your customers have when purchasing from your company and the deadline you have to pay your suppliers.
7. Check opening balance
Understanding the opening balance of your business provides a clearer financial picture.For example, if the company is in the red, it is important to carry out a careful analysis of costs in order to improve management.
Furthermore,the opening balance is important for monitoring how inflows and outflows are progressing, helping to understand whether the business is makinga profitor not based on the entries made.
8. Create categories
Using cash flow categorizations helps you have more details about how your company is doing, in addition to improving cash flow management.Another advantage is the ease of identifying which are the main sectors that generate revenue inflows and which are the cost categories that have the most outflows.
Furthermore, it allows you to understand whether there are excessive expenses in any part of the company and helps to identify products with a goodcontribution margin, which are important for the success of the business.
9. Make updates
There is no point in starting a cash flow and not making constant updates, posting the inflows and outflows that occur.The ideal is to do this daily.However, this activity can be hard work and take up a lot of an employee’s time if you don’t have the appropriate tools.
In this sense,the use of financial software helps a lot, as it allows automation that will generate efficiency for the enterprise.Furthermore, when you have a good solution, you can have access to detailed reports and make projections to understand the progress of your business.
