Cash flow checklist is a valuable tool for any business this 2021. A year often comes new and exciting opportunities for business growth. But before you dive in and explore the possibilities of 2021, you first need to make sure your business is in financially prepared. The best place to start is with your cash flow.
You need to take a good look at your company’s numbers and determine how you got to where you are. Then, you must find ways to boost your cash flow so you can fuel growth and thrive in 2021.
Here’s a simple cash flow checklist that will help you with this:
Item #1: Evaluate Your Current Cash Position
Now that the holiday season is over and we’ve welcomed a new year, the first item on your cash flow checklist is your finances and assess the results.
Sit down with your accounting team and go over your cash flow statements from the last 12 months. Pay close attention to the opening balance, cash inflow, cash outflow, net cash flow, and closing balance for each month. This will give you useful insight into your company’s cash flow trends and allow you to identify when and why your cash reserves have been low. You can use this information to implement strategies to help address recurring cash flow issues like late-paying clients.
Item # 2: Revisit Your Pricing Strategy
Increasing the prices of your product and/or services can help boost your cash flow this year. The second item on your cash flow checklist is to review your pricing strategy. You need to make sure it’s a raise that your customers can handle. You don’t want to shock and put them off with a huge mark-up.
Take time to analyse how much of an increase your target market will tolerate. Then, prepare a pitch that properly communicates how your brand or your product will deliver value to make the price increase worthwhile. Make sure this information is properly disseminated to your customers and give them time to adjust to the new rates.
Item # 3: Create A Forecast Schedule
If you haven’t done this yet, now is the perfect time get on it. Tick this item off your cash flow checklist by setting a schedule for creating and review your cash flow forecast. Forecasts are usually created for a 3-month period, but if it’s more convenient for your business, you can extend this period to 6-12 months.
Make sure you commit to reviewing your forecast on a regular basis. This way, you will know when you to adjust your budget and/or business operations to suit your cash flow projections.
Item #4: Manage Your Stock More Efficiently
Take time to evaluate how you handled your product inventory in the last year. Holding too much stock or paying your suppliers in advance can lead to serious cash flow issues. To avoid these pitfalls in the new year, set a schedule for when you need to review your stock levels. This way, you can identify the items that are not selling for extended periods. You may need to replace these items or remove them from your offerings entirely.
Also, try looking for suppliers who are willing to sell you stock on an “as needed” basis. This way, you will not waste money on paying for product inventory that just sits in your warehouse, unsold.
Lastly, consider negotiating payment terms with your existing suppliers. Aim for extended payment terms so you can keep cash in your account longer in case you need it. Thus, improving your daily cash position.
Item #5: Review Your Outstanding Accounts
The last item to tick off your cash flow checklist is a review of your outstanding accounts. Go over your list of outstanding accounts and identify the ones that need to be dealt with as soon as possible. Perhaps you’d like to start with the oldest unpaid invoice or the one with the highest. Then, come up with a plan for improving debt collections this year so you can eliminate the items on this list.
You can start by reviewing your entire invoicing and collections process—how you bill clients, how frequently you send out invoices, and who is in charge of collections. Determine where the bottlenecks are and find ways to address the issues.
For instance, if your company is service-based, try offering online payment methods to make things easier for your clients and reduce late payments. If you find that you just don’t have enough time to focus on collections, consider hiring a professional debt collection agency.
Making sure your business starts the year with your finances in order will help you set up a good foundation for a more profitable and successful year.