Accounting – 4 Rules for Managing Business Cash flow
The worst mistake that most business owners make is making financial decisions based on their current bank account balance (Also see Accounting for Book and Bank Overdrafts and their Cash Flow). They tend to forget that the balance is constantly in flux. It only reveals the money you have at the moment but not the money that you will receive or exit your business bank account. Instead, you should make your financial decisions based on your company’s cash flow.
Expenses are easy to handle since you as the business owner can decide when to settle the bills before their due dates. However, for you to have enough funds to finance your daily business operations, you need to ensure that your debtors pay in time. Therefore, collecting revenue in a timely manner is the key to having a healthy cash flow.
Here are other tips to keep your cash flow healthy.
Keep accurate and up-to-date books
Detailed accounting reports and well-kept financial records will help you to understand your business cash flow effectively (Also see Best Accounting Practices for Small Businesses). You should never fall behind on your business bookkeeping and accounting responsibilities. Even if you have in-house bookkeeper and accountants, you should strive to know your company financial records to strengthen your knowledge about your business cash flow.
Keep your accounting process simple
If accounting isn’t your thing, engage a professional accounting service in Singapore that give you a hand. A simple and reliable accounting process combined with experience and knowledge of an expert accountant will help you to track your cash flow easily.
Keep your personal and business finances separate
Separating your personal and business finances will make it easier for you to monitor your business cash flow. Your company funds should flow in and out of a dedicated company bank account. This will make it easier for you to keep a consistent cash flow record (Also see Bookkeeping Tips to Save Time and Money).
Set aside cash reserve
Having a cash reserve is one of the most effective ways to ensure that your business cash flow is healthy. The cash reserve can be helpful especially during unexpected circumstances. Besides, cash reserve will help you if you intend to expand your business operations. Note that this cash reserve doesn’t replace what your debtors should pay. Therefore, as you keep the cash reserve, remember to collect your accounts receivables in time and keep accurate business books.