3 Investments To Improve Cash Flow Timing

If money is energy, we can think of cash flow like a river. In order to optimize its liquid flow, you have to keep it at roughly the smae level throughout the year where appropriate. In river management, that might mean adding supports here and there, rerouting water to irrigate, and adding dams to block its flow where appropriate.

That metaphor can help you see that it’s not just how much revenue you’re earning, but how it’s being applied to fuel your business and for what purpose. Timing is everything in this practice, and it’s why companies hire dedicated financial professional once they grow to a certain size, or at least have an accountant on retainer.

Now, cash flow timing isn’t necessarily about staggering when you’re paid – usually the sooner you get money the better. But how you spend it and when is most optimal to can also be its own little practice worth understanding. In this post, we’ll discuss how to achieve that best outcome:

Streamline Your Incoming Revenue

The faster you can get paid, the healthier your cash flow will be. You can make it as easy as possible for your clients to pay you, perhaps by using online payment systems, so they don’t have to waste time with checks. If a company is known for sending out clear and detailed invoices as soon as the work is complete, customers will begin to know how to interact with you when using your services, or perhaps the minor discount you give on immediate payment. It helps to have a system in place for following up on late payments as well, which can help your business get the money it is owed much faster.

Manage Your Outgoing Payments

While it’s important to get money in, you also have to be mindful of how and when you send it out. Paying your own bills on time is a fundamental part of maintaining a good reputation with your suppliers and vendors, after all, and it can help you avoid any late fees as well. You can also be strategic about when you pay your bills, so you can keep cash in your account for as long as possible. Is it a little hypocritical to not expect companies to do the same with us? Well yes, but if there’s no incentive, you’re within your rights to pay within the timeline that suits you, contract allowing. If you balance it well, such an effort may help you maintain a steady cash flow and ensure you always have enough capital to handle your day-to-day expenses, which is a great way to avoid debt.

Have A Cash Reserve

Even with the best cash flow practices in the world, there are always going to be slow periods or unexpected expenses that can catch you off guard. This is where a cash reserve comes into play, or alternatively, why a means to access capital from an investor when needed can be so important for companies. The best approach is to set aside a portion of your revenue for a rainy day, so you have a cushion to fall back on if a client is late with a payment or if you have a slow month, as even the top companies do.

With this advice, you’re sure to improve cash flow timing.