What is cash flow?

As an entrepreneur, you should know that your cash flow is calculated differently than your profit. With cash flow, you calculate the difference between income and expenses on your business account, while for profit, you should look at the difference between turnover and costs. Cash flow is often expressed over a period of time, such as a month or a year.

‍Negative cash flow vs positive cash flow

So what is the difference between positive and negative cash flow? With a positive cash flow, more money comes in than goes out. This gives you sufficient financial space to meet payment obligations. For example, paying your employees' bills or salaries. While this is exactly the opposite with a negative cash flow. That is why it is important that you have a good insight into your cash flow. Below, we'll discuss six tips to help you improve your company's cash flow.

1. Increase receipts

Every euro that comes in affects your cash flow. How can you ensure that your cash flow improves? Increasing your revenue is essential. For example, you can increase the number of customers or orders by using a new way of marketing.

It's also important to make sure that your customers pay invoices on time. Sometimes you need to send a payment reminder because a customer hasn't paid an invoice. At the same time, you can also think of special promotions. For example, discount the next invoice if they pay the current bill within a week. This is because this prevents invoices from being paid too late or not.

2. Debtor Management

In addition to encouraging timely payment, there are a number of options you can use to improve cash flow. This is how debtor management also comes with benefits. By having a good idea of when each customer has to pay, you make it easier for yourself to keep an overview and follow up outstanding invoices. You could reward paying customers quickly by, for example, giving a discount on a subsequent invoice if they pay in advance within a week or (partially).

For long-term projects, opt for interim billing. This increases the billing frequency from, for example, once a month, to every two weeks or even weekly. As for the payment itself, make it as easy as possible for your customers. By offering multiple payment options, you can lower the payment threshold. Choose a digital payment request such as iDEAL or offer the option to pay by credit card. This way, you can make it easier and faster for your customers to pay.

3. Cash flow overview

Controlling your expenses is an effective way to get your cash flow in order. It is important to know how your cash flow is doing, but it is even more important to know what it will be like in the future.

With a cash flow forecast or overview, you can calculate how much money you need to meet your payment obligations. This gives you a good overview of what you have to pay in terms of rent and salaries, for example. You can do this very easily in Excel.

4. Creditor Management

Creditor management is simply an overview of your purchase invoices from your suppliers. To improve your cash flow, you could see if you can make a payment appointment with your suppliers. A payment agreement may be that you only pay when a product has been sold or that you can negotiate the purchase price.

To know who you can make a payment appointment with, it is useful to make a payment schedule. Then you have exactly in mind which expenses should be paid first. This includes important suppliers or employee salaries. This ensures that you maintain sufficient income for important payments.

5. Consignment

Consignment can be seen as smart shopping, such as making an appointment where you only pay after selling the product. By purchasing smartly, you can optimize inventory and ensure sufficient inventory without wasting space. This can result in fewer additional energy or insurance costs for your warehouse.

Have a conversation with your suppliers. They may be able to offer flexibility by delivering directly to the customer, saving you on inventory and any delivery time — and costs.

6. Control your cash flow

Finally, you can easily control your cash flow by having a report on your cash position every day or at least twice a week. Look at all income and expenses in that period and take stock. Do you have a positive cash flow? Good job, hopefully our tips have made you even wiser. If you do see a shift, ring the bell right away. Get your overview and see what you can possibly change. That way, you won't keep chasing the facts.

If this does not include anything for you, check out the 9 tips to improve your cash flow. Who knows, maybe you'll find the solution there that will help you get your company back into a good flow.

Business loan: quick and easy

Curious about more tips for improving your cash flowWould you rather have a little less hassle and solve the temporary shortages? At Swishfund, you can take out a business loan easily and quickly. This allows you, for example, to optimize your inventory or invest in staff or a debtor management system. Are you curious about the possibilities? Take a look at our page about a business loan.

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