Cashflow—keeping money flowing in and out of your business –can be the difference between the growth of your business and its collapse. As is often said, cash flow is the lifeblood of any business. Learning how to manage cash flow in business is a skill that every business owner needs to have.
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What follows is our exploration of five practical tips to help Nigerian business owners improve their cash flow management and keep their ventures sustainable.
Separate Personal and Business Finances
A common mistake entrepreneurs make is mixing personal spending with business income. People who do this find it difficult to track cash inflows and outflows accurately. To protect yourself from suffering the consequences of this type of financial mismanagement, you should do the following:
- Open a dedicated business account.
- Pay yourself a salary rather than dipping into business funds.
- Use simple accounting tools like Excel, Wave, or QuickBooks to track expenses.
When you separate out your finances this way, you’ll know the true financial health of your business.
Monitor Cashflow Regularly
You can’t improve a phenomenon if you can’t measure it. Make it a habit to review your cash flow weekly or monthly. Create a cashflow statement that records all your inflows (sales, investments, loans) and outflows (rent, salaries, inventory, utilities).
If you track your cash flow often, you will be able to predict periods of cash shortage, spot unnecessary expenses, and plan for future growth. These benefits could set your business up for growth.
Speed Up Receivables
Late payments from customers are a major challenge in Nigeria. When this happens, your books may say that you’re raking in a lot in revenues, but your business could be on the ropes even then.
To keep cash moving, set clear payment terms from the start. Your customers need to know from the onset that you’d prefer to get fully paid in good time (specify payment means and deadlines). Also, offer discounts for early payments, and use payment platforms like Paystack, Flutterwave, or bank transfers for quicker settlements.
In addition, you should follow up politely but firmly on overdue invoices. The faster you collect receivables, the healthier your cash position will be.
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Control Expenses Wisely
Every naira saved strengthens your cash flow. You should be vigilant about expenses, especially during inflationary periods. Don’t let them run uncontrolled.
Some things you can do to rein in expenses include negotiating with suppliers for discounts, buying in bulk only when it lowers costs and doesn’t strain cash, and outsourcing non-core functions instead of hiring full-time staff.
If you find that there are unnecessary overheads like excessive office space or unused subscriptions, you could either give them for a recurring fee or cut them out entirely (by moving and terminating subscriptions).
Build a Cash Reserve
Unexpected expenses (like fuel price hikes, equipment breakdowns, or policy changes) can drain your business. But if you have a cash buffer, you’ll stay afloat.
You can begin building up this buffer by saving at least 10–20% of monthly profits. Make sure to keep reserves in a separate account to avoid the temptation to spend them as personal funds.
You may even go a step further and invest some of your business’s cash reserves in low-risk opportunities like treasury bills.
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Final Words
Mastering how to manage cash flow in business is a must for every Nigerian entrepreneur. If you implement the ideas we’ve shared in this article, you could position your business for growth.
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