Be it for business purpose or for personal finances, managing cash flow is one of the important requisite to keep oneself afloat. Here are the five tips that some of the prudent money managers follow to keep a tab on the efficiency of cash flow.
Maintaining a cash flow budget:
List out the streams of income carefully and mark all the expenses against it. A well formed cash flow buget should be able to take care of all expenses. While it should also account for the extra cash in hand to be invested for better purposes. A cash flow budget should always be up to date as expenses paid should be reflected in the account.
Paying as per schedule:
One of the main aim of cash flow management is to check if there is no due credit liability. Ensure that all bills are paid on time so as to avoid future hassles. For businesses, checking on accounts payable is mandatory to know how much is left to be paid. Business owners could prepare an aging schedule to understand if they are current or crossed the due time for payment of bills.
Every single expense gives an opportunity or a window for cost reduction. A careful analysis of cash flow budget and actuals over a period of time will help an individual to understand the excess flow. Such flows could be successfully curtailed before they are overblown.
One single form of credit could not be extended for all. Different individuals need a different form of financing to meet their goals. For individuals, this could be about reviewing their credit card usage and loan portfolios like, home, personal and auto loans. For businesses, this means evaluating the best financing option for their working capital requirements and long term goals.
Let cash earn for you:
A Cash flow manages wisely is definitely one way to retain surplus. Such excess money should then be employed to yield superior results. Any excess could be invested into equities or could be used to systematically repay debt.