Posted: May 25th, 2022
Cash is the main basis of financial management in a new company. In most instances, the period between payment of suppliers and employees as well as a collection of debt from the customers is often a challenge. The solution to all these financial challenges is sound financial flow management. Managing of cash flow means delaying expenditures of cash and at the same time ensuring anyone owing the business pays up rapidly.
Managing Cash in a new business
Measuring of cash flow is necessary as accurate financial flow projection helps the business owner to be aware of an upcoming business challenge before it happens. On the other hand, cash flows should not be used to gauge the business environment in the future. There are a number of elements that need to be considered to counter the challenges. The factors are evaluating the payment histories of the customers, business thoroughness in identifying upcoming expenses, and the patience of the business vendors (Land & Taylor 2010).It is also crucial to ensure that receivables continue to come into the business at the same rate the business has been receiving them. Payables need to be extended as they have been in the past including expenses like capital improvements, principal expenditures, and loan interest, as well as accounting for periodic sales fluctuations.
Starting financial flow projection by addition of cash at hand at the start of the period with other receivable cash from other sources, needs to be a priority. The situation is significant as the process assists in gathering data from salespeople, collections, service representatives, credit workers and the finance department. Another element in making accurate financial flow projections is to have detailed knowledge regarding the amount of cash and dates of future cash outlays. This means having an idea on how the total expenditures in the business by having a line item on the business projection for each capital outlay such as rent, wages, inventory salaries together with other taxes that have been withheld or paid.The simple idea is to enhance the speed with which the business turns materials and supplies into commodities, records into receivables, and receivables into finances (Stone 2001).Giving discounts to customers paying their bills promptly, and asking them to make payment deposits at the time they are taking the orders is significant in managing the financial flow. As a new business man, evaluating all customers who wants to take goods on credit is a basic requirement.
Top-line growth of sales growth can cover a lot of challenges in most times. When one is managing a new company which is growing, the business man has to scrutinize the expenditures. It is necessary to control the number of expenses not to exceed the sales. Usage of electronic transfer of funds in making payments assists in tracking and keeping records of payments made into the business. The method assists the business to remain in contact with the present suppliers at the same time retaining usage of funds for a long time (Land & Taylor 2010). Communicating with the business suppliers to make them informed on one’s financial situation is a necessity when making a delayed payment as the suppliers will understand. Careful consideration of the offers offered by the vendors like discounts for payments done earlier can assist the business in saving some cash.
A new business requires a conducive environment to assist in the growth and expansion hence the need for evaluating any decision made regarding the business. Financial aspect in a new business is a complicated matter which requires sound monetary decisions to make the business achieve the laid down objectives. The major element in handling cash shortfalls is being aware of the problem at an earlier stage as dealing with the challenge becomes easier.
Stone, R. (September 01, 2001). Managing wealth: A new approach. Journal of Financial Services Marketing, 6, 1, 84-97.
Land, C., & Taylor, S. (January 01, 2010). Surf’s Up: Work, Life, Balance and Brand in a New Age Capitalist Organization. Sociology, 44, 3, 395-413.
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