5 Instant Cash Flow Factors for Business Success Has Just Gone Viral!by Jamila Allen Accountant
Cash flow is crucial to the success of your business. To manage it, one needs to know what drives that cash flow. When you review your financial data, there are a lot of variables that must be taken into consideration. An accounting software makes it easy to calculate and tally your business performance. QuickBooks is the top choice among CPAs and accounting professionals. When mated with cloud computing technology, QuickBooks cloud becomes an ultimate alternative for business owners and their authorized professionals to work on, without the hassle of technology.
Improving cash flow management is the key to success and to unlocking your business’ potential. Cash flow works differently for different organizations, but you cannot manage what you cannot measure. When you review your financial data, there are a lot of variables that must be taken into consideration. An accounting software makes it easy to calculate and tally your business performance. QuickBooks is the top choice among CPAs and accounting professionals. When mated with cloud computing technology, QuickBooks cloud becomes an ultimate alternative for business owners and their authorized professionals to work on, without the hassle of technology.
Cash flow is crucial to the success of your business. To manage it, one needs to know what drives that cash flow. Now the question arises, how to analyze these numbers and find out the most important factors? There are a few important drivers to be taken into consideration. Using this information to your advantage can improve your company’s financial status.
Below are instant cash flow factors for your business success.
Accounts Receivable and Payable Days
Assuming that payment is made on credit, account receivable days are the number of days that it takes a customer to pay. The time of repayment may be 30 days, but customers don’t always pay on time. So, the account receivable days can be much longer. One has to be careful to avoid discrepancy in these terms.
The number of days it takes to pay the amount to a vendor is Account Payable Days. Vendors are usually paid out faster than the cash flows in a business, which can sometimes cause a cash squeeze. A company has to be careful while paying out cash as they are waiting for customers payment to come in. They can only operate on a limited level.
Work Progress Days
The number of days where a product based company sits on the stock before selling it, the waiting days. For a service based company, these are the days between which wages and materials are paid for and when the job is finished and invoiced. Additionally, when a job is completed before time, it improves customer satisfaction, a mighty incentive for the client to pay for the job done faster.
Change in Price Percentage
Any fluctuation in price, a decrease or increase or a discount, is taken in price change percentage. You cannot sell a product for the same price for years and still earn a profit. There are also factors that are nearly impossible to foresee, such as a spike in fuel prices or an increase in food prices. Your company should be able to accommodate for these variations, which is why it is so important to monitor your margins.
Growing Revenue Percentage
Increasing sales can sometimes exacerbate your cash flow problems. You need to pay to produce the product and maintain it in stock while also paying for labor to sell the product. Remember, you may not get paid by the customer right away. You need to have enough cash in the bank to cover the costs of your labor and operating expenses. If you’re already running low on resources, increase in sales can actually decrease your cash flow.
Cost of Goods Sold Percentage
The costs of goods sold or services offered are essentially all of the costs that are connected with manufacturing a product or delivering a service. Reducing the costs of goods sold directly impacts your finances. Steps to reduce your percentage can include buying materials in bulk, negotiating with suppliers, and reducing wastage. Even if you are able to reduce your percentage by just 1%, you will notice a significant change in your bottom line.
Cash flow management is what leads to making the right decisions and working on gaining the right clientele. Implementing measures to boost cash flow is imperative to your business’s long-term success and health. A reliable software like QuickBooks helps in calculations and tally your business performance. When hosting QuickBooks in the cloud, you gain many more advantages, majorly remote access to the accounting software.
Created on Mar 27th 2018 05:47. Viewed 161 times.