Cash shortages can prevent you from meeting your financial obligations and make it difficult to expand your business.  In some cases it will mean you will need to close your business. It is important to know your cash flow position.  To manage your cash flow, take note of the following tips.

Account for Every Shilling and Cent

  • Install an accounting system that produces relevant financial reports and meets tax requirements.
  • Keep your financial records and bookkeeping up to date.
  • Use the information in your accounting system to draw up a budget and cash flow forecast.
  • Manage your cash inflow and outflow – be prepared for anticipated tax installments and other payments.
  • Do your banking regularly, both for security reasons as well as keeping track of your cash flow.
  • Reconcile your bank statements regularly, double-checking receipts and payments with your own records.
  • Ensure that you receive record and retain all tax invoices for taxable purchases to support your claim for tax credits.
  • Consider visiting your accountant every three months to review your business performance.

Other Important Factors

  • Bill your customers early and often.
  • Keep a detailed account of all your debtors and act promptly on overdue accounts.
  • Promptly follow up any dishonoured cheques.
  • Consider offering discounts for cash sales or early payments of credit purchases.
  • Consider alternatives to improve your sales terms, eg lay-terms, payment terms, credit terms.
  • Keep a detailed list of amounts that you owe.  Your debts may build up without your knowing.
  • Use payable credit terms to your benefit, increasing the effectiveness of your cash flow.
  • If suppliers want to be paid early, ask about discounts for early payments.
  • Manage your investment debt.  Don’t over-borrow.
  • Keep some cash for rainy days.
  • Don’t over-commit your personal expenses.

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