Business is profitable and it looks like it’ll be smooth sailing for the next few months. Does that mean you can take it easy and switch off for a while? Not entirely. Regardless of how well business is going, you must keep an eye on your cashflow for the smooth running of your business. Neglecting to do so could easily cause problems that spiral out of control. This is especially true if your business is real-estate property management.
Suppose a temporary cashflow shortage delays your debt payments. This has a detrimental impact on your credit rating so the cost of borrowing rises. The worst-case scenario is that the lender calls for repayment of the loan if you miss a couple of payments. Another potential scenario is that lack of funds causes you to miss out on opportunities to grow your business. So, it is crucial to maintain a steady and healthy cashflow, and this calls for regular monitoring. Here’s a few good practices to follow.
This is probably one of your operational goals already, but if you have not reviewed your operational procedures, perhaps it is time to take another look. New technology could provide new methods to lower costs and improve efficiency.
Gauge how reliable a customer is before you extend them credit. You can also consider their credit reports and bank references, particularly when significant sums of money are involved. If customers are tardy with payments, given them a reminder call as a gentle nudge.
Budget for Cashflow
Get into the habit of preparing a budget of projected inflows and outflows so you have some idea of whether you’ll have enough cash on hand to meet business requirements. This can be done on a monthly or weekly basis.
It is important to quickly resolve billing and shipping errors or disputes so that payments from customers are not delayed. Delayed payments can hurt your cashflow. In some cases, offering discounts for early payments might make financial sense. Clearly specify your penalty charge for late payments in your payment terms.
The early bird gets the worm, so send out your bills promptly. This ensures that your billing cycle starts faster and you receive payments quicker. This helps maintain a steady cashflow.
Make it easy for your customers to make payments so that you receive payments faster. Providing convenient payment options can do wonders for your cashflow.
Consider implementing a software solution for cash management so that processes are streamlined, accurate and efficient. It can be the right choice when you have many other responsibilities to handle as it makes it easier to manage and monitor your cashflow. It can even let you check the health of your business from a mobile device.
These tips should help you monitor your cashflow so you don’t suffer from shortages, even temporary ones. Maintaining a steady cashflow will ensure smooth operations so you can attend to the main aspects of your business such as property management. If you have any doubts, feel free to contact us for help.
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