Cash flow management is a challenging business function that deeply influences a business’s financial performance. Integrating a payment system and following several dos and don’ts can ensure better cash flow management for a business.
While businesses focus on revenue targets, payment recovery and its effective use are essential to ensure that the business has a strong foothold in terms of liquidity.
The advent of digitization has somewhat supplanted cash payment. However, cash circulation continues to increase in volume. Therefore, the focus of a business should be to have a defined cash flow management plan with key deliverables defined and leverage a payment system for online transactions.
Dos – How to Manage Cash Flow Better
Let’s explore a few steps that you can take to improve cash flow management,
- Creating a plan and sticking to it
Study your cash flow to identify patterns to help you design a cash flow plan, i.e., when and how much cash flows in and out. Once formulated, you should stick to the plan – from sales order to customer payment recovery and from purchase order to payments.
- Have a financial schedule/calendar
Having a financial calendar can help execute a cash flow plan. The payment time can be scheduled, while accrual reminders can be sent on time. Subscriptions, monthly dues, and bills can also be scheduled so that you don’t face any late payment charges unnecessarily.
- Take advantage of technology
The use of technology can help you avoid the usual perils of cash flow management. Accounting software can make a difference in your cash flow management for record-keeping and other operational assistance. Along with this, you can opt for PayU Priority Settlements for cash flow management. By integrating the PayU Priority Settlements, you get greater cash flow control, an auto-reconciliation feature, and flexible and instant payment settlements without hassle.
- Following up
Following the financial calendar and not following up on payments may lead to defaults and delays in cash flow. Moreover, it is not just the payments recovery that needs a follow-up. You can also use a payment system to guide customers on terms of payments, due dates, etc.
Don’ts – Things To Avoid In Cash Flow Management
Here are a few things to avoid to manage cash flow better:
- Not raising invoices on time
Customers often pay invoices as per the credit period. Any delay in raising the invoice can lead to a subsequent delay in payment release, thus disrupting the cash inflow.
An invoice should be raised after fulfilling the agreed milestone(s). And once you raise the invoice, you can ensure that the customer gets all payment mode options with PayU, be it Credit Cards, Debit Cards, Net Banking, EMIs, BNPL, QR, UPI, or Wallets.
- No emergency fund
Contingencies can occur at any time, and businesses go through lean phases now and then. A portion of the business payments received should be set aside for emergencies to ensure that you can make a cash or banking payment even when business is slow.
- Not delegating
A well-run business always deploys dedicated personnel in key positions. With various operating, investing, and financial activities like raising invoices, customer communication, recovery, liquidity investment, processing payment orders, etc., delegation within the business can ensure each sub-processes functions smoothly and with synergy.
- Not communicating
The various functions within the business should be in constant communication regarding the cash flow position. Expected delays in receipts, potential cash crunch impacting business payments, and budget vs. actual comparisons are some of the things that should be discussed and communicated among relevant stakeholders to avoid misunderstandings or delays.
While you follow the aforementioned tips to manage your cash flow better but there’s another way to manage it easily without facing the daily cash crunch. Yes, with PayU Priority Settlements, it is easy to keep the cash flow going & accelerate growth at every step.
In today’s digital age, payment and settlement systems have streamlined cash flow management for small and medium enterprises and even large e-commerce marketplaces. Besides, with smart checkout solutions and no-code solutions, PayU further diversifies the options you can have to accept payments. Similarly, payment disbursals are made easy by PayU with automated customer, vendor and aggregator payment solutions. Thus, when it comes to payments as a service and other cash management solutions, an association with PayU can make your business operations and cash flow hassle-free for your customers and your team.
Frequently Asked Questions
Cash flow can be negative if the expenditures exceed the income due to credit misuse, bad debts, poor cash flow management, etc.
No, net income is the gross income after deducting expenses for a particular period. Cash flow is the change in the cash balance between two accounting periods.