How to Accurately Monitor Your Company’s Cash Flow

Your company’s livelihood depends on the cash flow needed to pay salaries, buy supplies and equipment, and keep business operations running smoothly. Without a steady flow of cash constantly coming into the business, the business would need to scale back and slow their growth to avoid going into the red. Accurately monitoring your company’s cash flow can save your business. See below for the best ways to stay on top of the company’s finances:

Deposit Cash into Interest-Accruing Accounts

Everyone loves putting money into an account that earns interest over time. The benefits of interest-accruing accounts are no different for individuals than they are for businesses. Although most banks require a minimum balance to start an interest-accruing account, the interest rates on these accounts are a lot lower than standard savings accounts. Collecting interest on your business’s income will ensure a steady stream of cash flow for the future.

Get Rid of Excess Inventory

Having excess or obsolete inventory hanging around your business is a waste of money and resources. It takes up valuable working space and uses capital that would otherwise be used for more productive business ventures. If your company has owned the equipment for a very long time, selling the equipment could result in taxable financial gain. Remember that taxable gain needs to be reported on your company’s tax filings. As a rule of thumb, plan to sell any inventory that either hasn’t or is unlikely to be used in a 12-month period.

Keep Cash Liquid

It may be tempting to invest your business profits in accounts such as certificates of deposit (CDs). However, this can jeopardize the amount of liquid cash you have available for potential expenses. To keep your cash as liquid as possible and ensure legitimate cash flow, avoiding signing up for long-term CDs or CDs with penalties. Instead, opt for investing funds you know you won’t need to access until the maturity of the CD.

Require Deposits on Large or Custom Orders

Custom and oversized orders can be risky for certain businesses. To protect your company’s financial interests, it is best to require a minimum of 50 percent deposit on large or custom orders. This is because custom orders usually have limited sales value, and large orders that go wrong can cost your business tons of money if no cash deposit was set up beforehand. If you have a deposit policy in place, it is important that your customers understand this to eliminate any chance of miscommunication.

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