Managing cash flows efficiently are a key to celebrate Success for any online business Posted on July 21, 2020January 5, 2022 Posted in Accounting reporting You must have heard the adage ‘cash is king’ and it is true for online business as well. Cash flow is an important component of success for such a business as it determines the new investments and market expansion. For an online business owner, it is mandatory to understand and track the cash flow. The crux of it is to see what amount of money is being brought into the business as compared to the amount that is going out. If the business requires more spending than earning, immediate changes have to be implemented to avoid going bankrupt. What is cash flow management? Cash flow management means keeping a record of the upcoming expenses of the business and drawing parallel against money receivable as well as calculated projected future sales. To do this the movement of funds has to be studied in depth to determine the financial status of the business. With expertise, you can predict cash flow as the business becomes well acquainted with the revenue cycles of customers, vendors, suppliers, and contractors. An online business will have its high seasons and low seasons but to keep it afloat, an understanding of upcoming expenses for employee overtime, equipment replacement, inventory management, logistics and other basic needs from a cost point of view is crucial. How to Improve Cash Flow? The solution to a cash-flow hurdle is not growth. Cash outlays regarding online business expansion must be planned in advance but taking the following steps is necessary for better cash flow management: Collect receivables: Speed up the collection of receivables. Ask customers in far-flung areas to opt for online transactions of money. They can even pre-authorize checks so that there are timed intervals. Make all your payments from one bank to smoothen the process. You can even ask the clients to opt for depository transfer checks. Introduce a scheme where the customers who pay bills quickly get rewarded. Fix credit requirements: It is important to ask potential stakeholders to fill out a credit application. For an online business, checking references is a must as frauds are common. Transferring money online has to be done with care but it is more worthwhile than manual transactions. Increase sales: Finding new customers, selling more goods, or adding other services is effective but it takes time. An integral part of any online business is to convert prospects into sales. For the time being, your business can focus on its existing customers by giving them some more benefits so that they spread the word. Nothing works better than good customer reviews for an online platform. Pricing discounts: The management of cash flow can run smoothly by incentivizing customers to make payments earlier than the billing period. To avoid a cash flow shortfall, see how offering a discount may impact the profit margin. Discounts are a must for online businesses as it nudges the customer to make an impulsive decision. Action plan: Assess the last year’s numbers as the foundation of cash flow for the next year. Be quick to adjust for anticipated changes like new pricing, funding sources, and new hiring. Online businesses need time to carve a niche but are booming at present. It is important to adapt to the new changes while keeping the foundations strong.