Get To Know Your New Cash Flow And Forecast For What’s Ahead
Cash flow is the flow of money in a company. More precisely, the cash flow indicates the cash flow a company has achieved over a certain time, for example over the month or in a year. The cash flow as a business measure and indicator for the financial health of a company shows the flow of resources. The key is calculated from the difference between income and expenditure and indicates the extent to which a company can finance itself. A good cash flow forecast arises when cash flows in, a negative cash flow when cash flows out.
Measures To Keep The Cash Flow Going
The company is like an engine. The engine has to keep going so that the oil can circulate and all important mechanisms are well supplied. It’s the same in a company. The company must not stand still. For this purpose, all providers should be involved in the cycle of constant movement and improvement. Ask regularly where there is room for improvement and make this part of your corporate culture. In the end, this will be reflected in a good cash flow.
Agree Short Payment Terms With The Customer
If a company has provided a service to a customer, there is no reason to defer payment. This means that you send the invoice and agree on a short payment term. With a consistent and unconditional dunning, you can educate your customers to pay on time. This results in fewer discussions and your business perceives you as very professional. There is also no reason to feel guilty when a company is courteous with reminders of proper payment.
Instead of using the complete capacity, it is better to orientate yourself precisely to requirements. You should review each job for your customer’s real needs. Obsolete PC systems can also be a source of errors that can lead to overproduction. The right thing to do is to enter into a dialogue with your customer in order to assess his needs and adjust capacities. This avoids overproduction, the associated capital tie-up and costs that affect your cash flow.
Shop As Needed
Only buy when you have a specific need. On the one hand, large quantities with purchasing at rock-bottom prices bring cost savings. On the other hand, there are storage costs and, above all, you reduce your liquidity. It is better to only buy the thing that you actually use. The lower order quantity from a supplier initially leads to higher prices, but in the long term it lowers the overall costs. For small order quantities, you can arrange just-in-time delivery with your supplier, for example. So you don’t have to order according to a forecast requirement, but can orientate yourself on the consumption. Although this increases the individual costs, the complete costs decrease and so does the need for liquid funds.
Avoid Losses and Waste
Unnecessary stocks and capacities lead to additional costs. It makes sense to reduce this in your company. It is good to produce according to the flow principle. All the necessary stuff and capacities are available and production can flow without interruption. You should only start production when all employees are available. This helps to avoid expensive production stoppages that cause high downtime costs. Machines and tools should always be ready for use. So-called productive maintenance can avoid losses and waste. The aim is to produce without defects, failures and accidents, while keeping quality losses as low as possible and increasing availability.