Aberdeenshire, the third largest city in Scotland, is a major business hub that is home to over 10,000 businesses. With every passing day, the number of startups and small businesses is rising. However, a growing surge in the inability to maintain cash flow has resulted in the downfall of many small businesses. This is because improper cash management often results in financial issues and constraints that are enough to stop small businesses in the long run.
Moreover, without proper cash management, profits also have no meaning. We have prepared a list of effective strategies to manage cash flow and help you flourish as a small business owner in Aberdeenshire. Keep reading to know more.
Top 7 cash management practices for small businesses in Aberdeenshire
1. Keep records using Cash flow worksheets
Using a cash flow worksheet can help your small business prepare and record the cash flow statements. It usually has two sections- balance sheet account and cash flow statement. A balance sheet is used to observe your business account balance and its changes whereas cash flow provides information on your expenditures.
2. Provide easy payment methods
Online payment methods are ideal for both customers as well as business owners since it is quick and easy. Try to avoid the cheque payment method because it involves a long process before the money finally reflects in your business bank account.
3. Use modern-day accounting software
Innovation in the field of technology has been rapidly rising in the present age. Luckily, multiple software applications have been developed to make cash management easier. For instance, you can incorporate cloud-based accounting for your small business. It will free you from the hassles of recording your cash flow manually and remove any marginal errors. You can access your account data easily when and wherever you want and all of them are securely backed up so losing them is out of the question.
4. Monitoring cash flow
Countless small businesses in Aberdeenshire allot an employee whose work involves tracking and keeping a record of the business cash flows, particularly where there is an unpredictable income stream. Thus, you need to properly train the person who will be responsible for reporting all the income and expenditures and ensuring enough balance is in the business account for future purposes.
5. Estimate cash flow forecasts and set targets
Cash flow forecasts are beneficial in predicting and planning the amount of money needed by the small business in the future, generally covering up to a year. Moreover, using a cash flow forecast will help you realize whether your small business is meeting all the goals or not.
There are three parts to a cash flow forecast:
- Estimated sales: You need to evaluate or estimate your upcoming weekly or monthly sales. If your small business in Aberdeenshire has been operating for over a year, you can easily estimate this by analyzing your previous sales history and considering the lower activity periods and average seasonal sales patterns. On the other hand, if you have just started your business, you can analyze the data from industry experts to make predictions.
- Payment timings: The second part includes noting down all the payments that you are expecting to receive. This includes the delayed ones that are yet to arrive.
- Outgoing costs: The last part includes predicting your business outgoings. Please make sure to look into all accounts of your small business including the fixed and variable costs.
6. Take cash reserves seriously
Unprecedented financial emergencies or unexpected events might arise at some point in the future which is why you always need to be prepared. This is why cash reserves are important. While it might be difficult to build large cash reserves for small businesses, make sure to build wherever possible in order to impart greater strength to your business.
7. Maintain your personal and business finances separately
Many new small business owners make the mistake of keeping one single record for all their business and personal finances which makes analyzing and tracking difficult. Thus, you need to keep your personal and business money in different accounts in order to run your business more efficiently.
Conclusion
Shortfalls are sometimes inevitable in the business world. You might be unable to cover business costs and bills at some point in the future. However, it in no way implies that you are a failure or that your small business is a failure.
Almost every small, as well as, large business owner in Aberdeenshire, has experienced deficit periods at some point in their business. However, you can always manage your cash flow better by identifying issues early and implementing the relevant change or strategy. In other words, if you practice cash management efficiently, it is unlikely that you will fall into some deep financial troubles in the future. Thus, make sure to adapt and implement relevant strategies in order to have a smooth run of your business.