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How to Successfully Implement Your Cash Flow Plan?

An optimum cash flow is vital for the success of all businesses. In fact, not having a good cash flow despite having an excellent annual turnover is why many small businesses lose their companies. Therefore, you must plan a successful cash flow and implement it consistently.

A cash flow analysis is an essential tool for monitoring where the money comes from each month and the expenses for each particular month. Many business owners need to realise where their money gets preoccupied and why they do not have ample cash to pay their staff or vendors despite being in net profit. As a result, you need a cash flow plan to make sure you have liquid money each month and to get a clear picture of your business spending.

Here is a step-by-step process of how to successfully implement your cash flow plan

Create a Cash flow Model

The first step is to tabulate your cash flow. You can use spreadsheets, pictorial representations, or cash flow software suggested by your accountant. The model should be easily understood.

Analyse your different incoming cash flow

Now, analyse the different income modes that will come each specific month. Remember, you are trying to figure out if April will be a good cash flow month and not the first quarter. Make the entries different for each specific month. This is because each month usually differs in the performance of sales, production, demand, etc.

Further, make two kinds of incoming cash flow categories, the first being monthly and the second being one-time. Monthly income includes sales, and one-time income can consist of a loan that is about to be received soon, a government grant, etc.

Analyse your different outgoing cash flow

Now that you have a clear idea of all your income sources, you will now consider the outgoing cash flow. You must follow similar guidelines for this step as well. You may also segregate your outgoing expenses into monthly and one-time expenses. Rent and staff salaries are monthly expenses, and buying a property can be one-time.

Make strategies for Low Cash flow month

After having a clear picture of your cash flow for each month, you will find that some months have better cash flow than others. This allows you to see better cash availability during those difficult weeks. You may also consider other options well in advance, such as if you should apply for a loan to improve cash flow.

Review and Monitor your Cash Flow

After having a well-thought-out plan, monitor the monthly expenses to see if they are going according to the cash flow plan. If there is any minor divergence due to unexpected expenses, your accountant would have already advised you on handling such scenarios. You should always be prepared for unplanned business spending to ensure a successful cash flow.

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