For many, one of the toughest parts of running a small business is effectively managing cashflow. As the saying goes, cash is king, and it's absolutely essential if you want to see your business grow and succeed over the long term.

Let's take a look at a few of the different cashflow management approaches, as well as why it's so important to get cashflow right.

Cash: in and out

As you grow your business, staff may come and go, and you may adjust your service offering, but there's going to be one constant: cash. Any delay from the time you pay your staff and suppliers to when you collect payments from customers is a serious issue.

COO of Strategic Funding Source, David Sederholt, explained that managing cashflow is similar to being an air traffic controller – an analogy I think is particularly apt.

"You can't have 100 planes trying to land simultaneously on two runways," David explains.

He went on to say that he regularly sees clients line up monthly bills, write checks, and hope that either they have enough cash in the business to cover them, or that upcoming sales from customers will float the payments.

"This is like Russian roulette with a check book."

"It is okay to write the checks all at one time, but you need to put them into a "holding pattern."

Getting to grips with cashflow

Monitor cashflow on a regular basis

Staying on top of cashflow is one of the more effective ways to prevent issues from creeping in. For example, errors in reports or accounts that could cause trouble further down the line. This is where tailored software can prove extremely useful.

Put a line of credit in place

An idea that's essentially an insurance policy, a line of credit can prove useful in preventing cashflow issues from arising. They're essentially taken out against a percentage of your inventory – a flexible loan. When the business runs into financial trouble, the line of credit can be used to make up any payments.

Be direct – yet fair – with customers

Businesses cannot afford to let invoices slip through the cracks, hence the need to be direct with customers. This is where an invoicing strategy is a good idea, one that pushes the need for timely payments. It's also a good idea to monitor repayment times, and see if there's room for improvement.

Build a cash reserve

The idea of nest egg isn't one that's exclusive to home owners. Building a cash reserve could be the difference between the business going under or succeeding. A cash reserve provides a buffer for the business in the event of any financial difficulty. When invoices aren't coming in, the company can instead turn to this cash to tide operations over.

Look for ways to expedite payments

As with your business, your customers are also likely going to be looking for ways to save money on a regular basis. Use this to the advantage of your own company by offering customers deals for making payments in a timely manner. Something simple like a percentage off the total could be incentive enough to have customers start making payments quickly.

More capable accounting software – and training to match – can help you to get better cashflow management practices in place. JIWA Financials is a powerful piece of software, with an impressive array of functions. Cash Book, as just one of these tools, makes it easy to quickly and accurately allocate funds and reconcile bank accounts.

If you think it's time to make financial changes in your business, reach out to myself and the team here today.