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  Our world is driven by cash. Hence, cash is the bedrock of every business. Cash is regarded to be more valuable than profits, stocks, receivables, revenues, and so on. With cash, SMEs can take on a new inventory, expand, pay staff, reach out for new supplies, etc. This is to tell you the importance of cash to businesses, especially SMEs. Studies have shown that a great number of businesses, especially 60% of them are worried about cash flow over the next 12 months.  Finextra argues that cash flow comes in three columns: i.) cash coming in (accounts receivable), ii.) cash going out (accounts payable), and iii.) access to cash (equity or debt raise). 
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If your business is spending more than what it earns, the cash liquidity will be affected and then will dry up in the long run. This is the biggest worry for small and medium businesses.  The ability to control, manage, increase and save their cash will guarantee the longevity and smooth process of your business. There are easy steps that businesses can take to combat cash flow issues. Here are the five we consider important.
  • Streamline Payment Process:

Making payment convenient is the bedrock of cash flow in businesses. The truth is that people love when payments are streamlined and easy to process. This is why businesses must eliminate inconveniences and all forms of stress for customers. For example, some payment methods like cash and bank transfers are subject to human error and human inertia. There are cases where businesses are in a haste to pay off their suppliers, but they are discouraged at the sight of friction payment, which may cause them to leave or revoke the business. 
  • Get Real-Time: 

Everything today happens in real-time. Everybody wants to live an instant life. Psychologically, we are gradually getting impatient. This has affected the way to do and run our businesses. There are various payment platforms and digital software that guarantee real-time payments. Introducing diverse methods of real-time payment is a way to go.
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Some customers may still need to pay via card, say for retail point-of-sale businesses, which have slow settlement times, but otherwise, you need to be implementing instant payments to have funds settle in real-time.
  • Reconcile, Reconcile, Reconcile

This simply means taking charge of your accounting books daily. You have to be on top of your outstanding invoices. The cheapest way to reconcile what comes in and what goes out is to employ accounting software that automatically reconciles paid. There is a lot of accounting software out there on Play Store. They include Xero and QuickBooks. This is the quickest and most efficient way to monitor your cash flow and potential problems. Without accounting, you are driving in the dark, which is dangerous for business. Conversely, by reconciling with accounting software, you will have less stress worrying about cash flow and as well save yourself a great deal of time doing this manually. 
  • Credit Control: 

Except you are running a charity foundation, as a business you must be very careful about credit facilities. You are not in business to please everyone all the time. However, credit is part of business, and you must be to identify if the business or persons are creditworthy, before you can grant them credit offerings.
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Bear in mind that some people might be slow on paying back, but you can employ credit controller software like Chaser, which send out automatic payment reminders and help with the collection process.
  • Cut Costs: 

Finally, another way to manage cash flow is by cutting costs. Therefore, it is important to work with cheaper services that can help you with such the capacity of eliminating costs and fees. For instance, you can choose a company that helps you save around 2-3% on all card payments. Aside from this, look at cheaper alternatives to mainstream supplies. For instance, you can choose clean energy, which is cheaper than expensive fossil fuel, when it comes to power supply.

Final Words

In conclusion, smart-business owners stay on top of their cash flow. They understand the long-term importance of monitoring and managing cash flows and their implication to the health of their business. They deploy strategies that make payment easier for customers and as well monitor their expenses by reconciling every invoice with the use of accounting software apps. They also ensure that their credit facilities are offered to those who are creditworthy. Finally, they employ cheaper modes of operation so that they can eliminate all forms of costs and fees. Smart business owners have a fetish for monitoring their cash flows by putting in place facilities and tools that keep them informed on such matters.  Featured Image Source: Freepick
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This article was first published on 29th June 2022


Nnaemeka is an academic scholar with a degree in History and International Studies from the University of Nigeria, Nsukka. He is also a creative writer, content creator, storyteller, and social analyst.

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